India currently boasts the world’s largest youthful working population. However, beneath this demographic vitality lies a concerning reality that demands attention: those currently in the workforce will become the retirees of the future. According to the India Ageing Report 2023, the percentage of the population aged 65 and older is projected to increase from 10.5 percent to 20.8 percent by 2050, indicating a doubling of the country’s senior citizens in just over two decades.
It is noteworthy that life expectancy in India has nearly doubled from 35.21 years in 1950 to 70.19 years in 2022, reflecting significant progress in healthcare and quality of life. While this is a positive trend, it also underscores the longevity risks, emphasizing the need for proactive and comprehensive retirement planning. It is crucial that retirement planning evolves from being solely a financial exercise to a holistic approach to post-retirement life, considering various vital aspects.
Regular, early investments:
Engaging in regular savings, investments, and sound financial decision-making is essential for building a safety net to sustain through retirement. Despite many urban dwellers believing they have sufficient wealth or relying on their children’s care, a recent retirement survey indicates that almost a third of the urban population is concerned about savings depletion within five years of retirement.
Starting the retirement planning and investment journey early enables individuals to stay ahead of inflation, even beyond retirement, through the effectiveness of compounding. While there are various retirement options in India, it’s important to note that benefits like pensions and gratuities are taxable. To mitigate tax liabilities, it is advisable to choose different savings instruments, including those with tax-saving options.
Diversified investment portfolio:
Pension plans and annuities offer defense against the risks of aging, ensuring retirees maintain a high standard of living and a regular income without worrying about running out of money. Striking a healthy balance between investment objectives and risk tolerance, as well as diversifying the investment portfolio, is crucial. Small-cap and mid-cap mutual funds are excellent options for portfolio diversification, with small-cap funds offering higher growth potential and mid-cap funds providing lower risk but substantial wealth growth over the long term.
Prioritize your health and family’s support:
Aging gracefully is facilitated by both physical and mental health. Retirement planning should consider health aspects and healthcare costs. A Retirement Index Study indicates that almost 59 percent of Indians prioritize health, while 33 percent consider finances to be the most important aspect. Social and emotional well-being are equally vital. Many urban Indians view retirement as a positive change and a stress-free life.
While there are no strict rules for retirement planning, and no one-size-fits-all approach, individuals must make decisions based on their unique priorities, perspectives, and situations. Given that many dedicate their lives to supporting families and pursuing dreams, living honorably and comfortably in retirement is achievable through focused financial planning. A comprehensive, well-thought-out retirement plan is the key to securing financial futures, achieving desired lifestyles, and ensuring comfortable and stress-free retirements.