The best part of retirement is when you get rid of a daily 9 to 5 job. But the worst part is there is the lack of a salary. To live the same life that you used to live before your retirement requires a substantial corpus which will last till your lifetime. If you will have a shortage of funds, then you will have to cut down your expenses and will have to compromise in every situation. And this is definitely not a solution to this problem. If you start investing wisely from the early stage, then you’ll don’t have to face any of these problems after your retirement.
When we a look at the stats, it clearly says that India has more than 50% of its population below 25 years and 65% of the population is below 35 years. Before Jan 1, 2004, the government of India used to give pensions to their employees after the retirement which was quite important for the employees. Nowadays employees or people have to start Retirement planning their post-retirement from the early stage to make them financially independent.
We all need money for our living. It is our first necessity. And to earn money a person needs to work. But we cannot work for a lifetime. There will come a day when we will have a loss of stamina to work. A fact says that, in India, average retirement age is 60 years. But, many retire before with their choice and sometimes with some other causes like job loss, disability, etc.
We can see that as per some of the norms of the profession, employees can even work till 70 if they are well. And in some professions, people have to retire early like in sports. In these cases, the different situation will have different financial consequences. Therefore, it is required to make a hand full of the corpus live a standard life after retirement.
Following are the factors which make an impact on your retirement corpus:
- Cost of inflation-
Inflation reduces your purchasing power and also consumes your savings faster since due to inflation, the value of money goes on decreasing year on year.
- Drop in rates of fixed income-
A few years back, you were able to maintain a particular income level by choosing fixed income instruments for investments, as they were providing high returns. But today, interest rates are dropping down which is the reason why this generation has to manage their income for their better living condition.
- Increase in life expectancy-
Since the medical technologies are being advanced day-by-day and so people are expected to live more than usual. Due to this, more corpus is needed for the people to maintain their living after the retirement.
- People shifting from joint family to nuclear family-
Earlier, there was the huge privilege of the joint family system in India due to which the younger generation could take good care of the old age person in the family. But due to the better employment facilities at different places, people are shifting from joint family to nuclear family. So, planning for the retirement from the early age has become must these days.
- Medical expenditure-
When you get close to the old age, there can be several medical issues which require a huge amount of money which get add up on your daily or monthly expenses. And the medical cost is also rising up day-by-day. So, to get rid of this situation in future, you have to invest enough in your medical.
From the above example, Mr. X would just need to invest Rs 7,927 monthly. And, Mr. Y won’t be able to achieve the corpus, even if he invests Rs 40,000.
So, to generate a good corpus, early investment is very much required to get a standard living after the retirement.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any agency of the Indian government. Examples of analysis performed in this article are only examples. They should not be utilized in real-world analytic products as they are based solely on very limited and dated open source information. Assumptions made within the analysis may or may not be reflective of the position of any entity.