Ideally, retirement planning is planning for those days in your life when you decide not to work anymore. Retirement planning ensures that you receive a regular income in the form of pension post-retirement. To live a better life during the golden years of your life, it is not advisable to solely depend on your children or EPF, PPF, and FD for your emergency requirements or fulfilling your daily needs. Instead, you should have a solid retirement plan that you start in your 30s or 40s to retire into a rich and independent second innings full of foreign travel and splurging on grandchildren, stop making the mistakes listed in this piece and do something today that your future self will thank you for.

A Few Interesting but Harsh Facts about Retirement

• If you are reading this then you are probably among the 90% new age Indians who have absolutely no retirement support called pension.
• India's 60+ populations will become 300 million by 2050 from 100 million today. Imagine the scenario when you will be one of those 300 million people with no source of income.
• The Indian Government is facing a huge fiscal challenge to provide pension/support to private sector retirees.
• The existing pension schemes are good for an organized workforce that forms about 10% of the total working population.
• Approx. 92% of the population working in private sectors refrains from social security i.e. only 8% of them are covered by pensions.

Having a Pension Plan Is a Vital Decision

Let us look at certain points which will help you make a better decision:

• The life expectancy rate in India is 70 years where your average working age is from 25 to 50 years. What about the remaining 20 years of your life post-retirement when you won't be earning an income?
• The increasing disorganization of a joint family system due to urbanization is leaving more families insecure, vulnerable, and devoid of social security.
• A sudden increase in life expectancy is responsible for the growing retired population of India. The happiness of living long doesn't come alone. Increased longevity also means more money is required to meet requirements.

Got a Job! Start Planning for Your Retirement

• All of us get bogged down with immediate expenses like housing EMI(s), rents, bills, fees, and so on. These expenses are inevitable same is retirement too.
• Start as early as possible and invest at least 10% of your income for retirement. Earlier you start better the compounding effect. For instance:

The Average Retirement Age is 60 years.

Scenario A:

• You started saving at 30 years of age
• You saved Rs 5000 (monthly) for 30 years
• At the end of the 30th year, you receive Rs 74.51 lakhs at 8% rate of returns

Scenario B:

• You started saving at 40 years of age
• You saved Rs 5000 (monthly) for 20 years
• At the end of the 30th year, you receive Rs 29.45 lakhs at 8% rate of returns

A difference of 10 years can bring down your investments from 74.51 lakhs to 29.45 lakhs!

Small Savings Turn into a Large Corpus

Mr. X invests Rs 6,000 in a retirement investment plan for 30 years. He receives a pay-out of Rs 90 lakhs (8% RoI). Presuming Mr. X earns close to Rs 40,000 per month, this is a mere 15% or so of his take-home salary. Also, his salary is only going to increase here on out, and the premium isn’t.

Note that if Mr. X begins investing at an even earlier age with smaller amounts, he will receive even higher pay-outs.

Conclusion

Retirement plans ensure you have enough wealth for your retired life. These plans will allow you to travel the world with your spouse, buy gifts for your grandchildren, and engage in all those activities that you could not do due to your professional commitments. This is why retirement plans are a crucial aspect of the mature urban Indian’s financial portfolio. Needless to mention, retirement plans being insurance products, they provide the following additional benefits:

• Tax benefits on premiums paid under Section 80(C)
• Significant death cover that is paid to your family in case you meet an untimely demise; this sum ensures your family's dreams and aspirations are not put on hold and they continue with the same lifestyle