OneInsure Blog

Retirement Insurance

Will your current retiral investments last for 25 years with no change in lifestyle & luxuries?

With life expectancy in India touching 80 – 85 years, retirement planning takes on a whole new meaning. While generations before us had to plan finances only until 70, the current generation has to plan finances for at least 20 – 25 years after retirement.

Let’s have a look at some quick (and scary) numbers:

  • When Mr. X retired in the year 2001, the retirement age was 60 years while life expectancy was averaged at 70. This means that Mr. X had only 10 years of non-earning life.
  • Early this year, when Mr. Y retired, retirement age stood at 60 again, while life expectancy for 2021 was averaged at 80 years, which is 10 years more than what it was 20 years ago. This leaves Mr. Y with 20 years of non-earning life. A little scary, right?
  • Twenty years from now (2041), when Mr. Z will retire, retirement age would still be 60 while life expectancy would be around 90 years. That would leave Mr. Z with 25 – 30 years of non-earning life. This is VERY scary.

Why worry about life expectancy?

When 60 was decided to be the retirement age, life expectancy for an Indian was 67 – 70 years. Retirement funds at 60 were enough for 7 – 10 years. However, in the last 10 – 15 years, medical advances have increased life expectancy to 80 years. Every 10 years, life expectancy increases by 5 years due to new medical technologies that are successful in extending life. Without proper financial planning, there will be no funds left to enjoy all of your retirement years in comfort.

Do you think your current retiral benefits and investments will be sufficient to sustain 20 – 25 years with the same lifestyle and luxuries you currently enjoy?

So, what’s the solution?

Planning for the first retirement at 60 is great, but planning for a second retirement at 70 – 75 is just as important. EPF and other investments will not sustain for 20 – 25 years, and being dependent on others (including children) during retirement is something to be avoided at all costs.

This is why it is necessary for one to create a safety net well in advance. There are several plans available in the market that allow you to start investing systematically for a fixed term and mature when you are close to 70. Let’s see some real-world examples (figures taken from leading plans):

  • Ramesh, who is 40, opts for a participating endowment plan and begins investing Rs 8,000 per month until he is 50. When he is 70, he receives close to Rs 40 lakhs at 8% RoI. Not only that, if he would have met an untimely death during the policy term, his family would receive close to Rs 8.5 lakhs as death cover.
  • Suresh, who is 45, chooses another participating savings plus protection plan and starts investing Rs 10,000 per month for a period of 18 years. When he is 75, he receives close to Rs 56 lakhs. Suresh’s nominees would receive approximately Rs 14.3 lakhs in case he meets an untimely end.

These instruments not only protect your retirement future but also assure your family is taken care of financially should anything untoward happen to you.

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