Your Retirement Won’t Be Like That of Your Parents & Grandparents. Are You Prepared?

Dec 11, 2018 | 10 months ago | Read Time: 3 minutes | By Dev Ashish

Do you feel that you are too young to even think about saving for your retirement?

It’s time to wake up and not be complacent.

Your retirement is not going to be like that of your parents and grandparents. And you will realize this by the end of this article.

Suppose your current monthly expenses are Rs 50,000 (at the age 35). Do you know what these expenses would be at retirement? It would be Rs 2.7 lakhs (at 7% inflation). That’s not a small amount. And that’s not it. Since you will stop earning at 60, you will need a retirement corpus large enough to take care of such high expenses for the next several years. Imagine if you live up to 85, then the corpus should be large enough to fund expenses (increasing every year with inflation) for the next 25 years!

This is the retirement bomb that is ticking for everyone.

I know what you are thinking – how did your parents and grandparents managed it so easily?

And that is what I want to highlight here – Your retirement is not going to be like that of your parents or grandparents. Things have changed a lot since then. Let’s discuss them briefly.

Increase in Life Expectancy

Scientifically speaking, you will live much longer than your parents and grandparents. Life expectancy is increasing for all of us.

So, you too will have a very long life if medical advancements continue the current trend and you don’t mess up with your health in between. But this also means that you will live for decades after retiring at 60. So, if you remain alive till 90, then you have 30 years after retirement to fund your expenses!

And that is the biggest problem. Unlike previous generations, your retirement corpus must last longer and hence should be bigger.

Can you afford it? – is the question.

You don’t want to run out of money when you grow old. Isn’t it?

Another related factor is people now have shorter working lives. Earlier generations used to start earning by the age of 20-21. But current education structure is such that many people start earning much later – like post 25. So lesser the number of years you have, less is the time for you to save for your retirement.

Not enough Pension or Social Security

As you might have noticed, the years of defined benefits and pension are already over. So unlike the previous generations who got their pension after retirement, you will not be getting one. Or whatever you might get might not be enough for retirement years.

Some are contributing towards pension schemes like NPS. But that won’t be enough as the annuity they buy eventually will be based on the accumulated corpus and will be fixed. Also, given the higher lifestyle expenses, the PF corpus available later might not be enough to last for 20-30 years in retirement.

Most people who aren’t covered under any pension program are unfortunately unable to visualize the impact of this big change.

Increase in Lifestyle Expenses

Do an exercise – Sit down with your parents / grandparents and estimate their expenses when they were your age. Now after adjusting for inflation, compare those numbers with your current expenses.

You will be shocked.

Their expenses were much lower than ours as their life was simpler and without too many unnecessary lifestyle-related expenses.

Obviously, since their expenses were low, they could easily handle their retirement with small pension and other savings. But since your expenses would be much higher, you can’t do without a big retirement corpus. Also, most of you won’t have any pension.

That’s not all. Since your life expectancy is higher, you will be spending more years as an old person who needs healthcare and medical support. That is and additional cost that our generation is going to bear for several years.

So please wake up!

Among all goals, Retirement Planning is the most critical one. And remember, like all other goals, you don’t get any loans for retirement.

You need to take Retirement Planning seriously. You need to understand that unlike your parents and grandparents, your life expectancy, the standard of living and inflation are much higher. So, you need to save a lot more than what they needed to. So, it’s not going to be easy.

The key to successful retirement planning is starting early, evaluating post-retirement needs and going for suitable financial products that not only help you reach the required retirement corpus but also help you beat the inflation in the long run. So, get in touch with an investment advisor soon.

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