Almost every second person who is retired today chants this mantra of having more money than they have. They keep thinking about how fruitful and wonderful their life would be with so and so amount of money in their account. How better it would have been if they would have started saving from their early years of working life. This situation is not just about retirement; every financial goal when not planned for, people regret about not having more money.
The future of retirement today is one big question mark in all the research studies. Generating an adequate amount of income during retirement is a major challenge for all the people given the financial conditions arising due to major economic downturn.
Shekhar was 23 years old when he started earning in the year 1975. During his initial years of job he did not gave much importance to his retirement savings. After having a family, as a traditional parent he was only worried about his children’s future. Unlike today, due to lack of options in financial products, he kept his savings in bank deposits. He never thought about inflation and the fact is that no one ever imagined that cost of education and marriage would increase at such a fast pace. As a result, when required he was short of the target amount and was forced to borrow for his requirement. This was the time he actually started thinking about his retirement but he was unable to save much for this goal as he was burdened with the loan amount. As rightly said, when circumstances force one to surrender everything that they have, that is when significance of investments is understood. In the year 2012, when he was retired, he was left out with Rs. 15 Lakh as his total savings and a house to live in.
Now with a monthly expense of about Rs. 20,000, for how many years do you think this amount will last long? Considering real rate of 2% this amount will last only for approximately 11 years.
This is the story of many families who are now regretting about their saving habits. Most of the people start thinking about retirement savings once other family goals are taken care off. Also they have a wrong notion that after retirement, one may not need much of the amount as one won’t be having similar expenses as the way they used to when they worked. One shouldn’t forget that there are hidden medical expenses that may arise; or they may live longer than expected and hence it is important to start saving from an early age for retirement. In the above case, if Shekhar would have invested even a small amount regularly towards his retirement savings, he would be in a much better position today.
In this world of swinging financial markets it is very difficult to just keep ones savings in bank deposits or traditional low yield products and not invest at all. It is rightly said to win competition one has to keep pace with the competitors. Similarly money also faces constant competition. This competition is against inflation and the products which can help money to win this competition have to generate more returns than the rate of inflation. Investing into mutual funds, equity etc. can ensure that one may earn good returns and their savings have enough value.
When it comes to retirement, it is not easy to just wake up one fine day and plan one’s funds; it is a long term process and requires full discipline. There are many schemes that may force one to compromise a little on today’s expenses but may provide greater benefits in the future.
One can heard many people saying - “I wish I had spent less on shopping bags and contributed a little to my retirement account, or I wish I had invested my savings into some productive assets.” Let this day not come. Better plan this long term goal in advance. Retirement is the time for one to enjoy life after work. Let it not become a burden. The author is a certified financial planner. He heads ‘Young Money’ initiative at Getting You Rich, a Financial Planning Firm