Retirement planning: The passport to happiness in your sunset years

After having spent decades of your life keeping up with personal and professional commitments, retirement is synonymous with the beginning of a phase when you can look forward to being stress-free and start checking off boxes from your bucket list that you would have created in your younger years. However, whether your retirement dreams will come to fruition depends on the effort you put in your younger years that ensures you have a steady stream of income when you bid adieu to the nine-to-five ground.

All too often in life, we tend to become complacent when it comes to our preparedness for life events that seem too far away in the horizon owing to a misplaced sense of certainty of there being enough time to ready ourselves for those eventualities. Procrastinating the task of retirement planning can amplify the impact of any exigencies once you join the league of senior citizens.

Gauging the intricacies of retired life

While retirement can come as a respite from the grind for some people, for many the thought of dwindling incomes and not getting a regular paycheck can be daunting. Debjyoti Nayak, who recently retired from a PSU says, “The sheen of retired life tends to wane when you actually retire because it isn’t easy to accept that you won’t receive a fixed sum every month in your bank account, especially in the initial days. It can be a psychological challenge, more so because there is also the awareness that you are entering a stage of life when your medical expenses can increase. Having a solid retirement corpus saves you of that psychological distress and hence it is extremely important to start planning for it as early as you can.”

The lack of dedicated funds and self-employment schemes in India also makes it imperative to not relegate retirement planning as an afterthought. A survey conducted by the NGO Agewell Foundation in association with the United Nations revealed that at least 71% senior citizens were of the opinion that there should be dedicated funds for them at the national level, which could support senior-citizen friendly projects i.e. old age housing schemes, old age trauma centres, old age mobile medicare services, old age recreation clubs, old age pilgrimage, etc. 67% respondents expressed approval for the setting up of a legal framework dedicated to ensuring their safety and security issues and 56% said the government must launch large-scale employment schemes for those who have retired.

Nayak opines, “It is true that there is a dearth of funds or schemes for the welfare of retired people. Hence it is unwise to not give due importance to retirement planning thinking you will continue working after 60 or that it will be a breeze to find new employment opportunities. You cannot be sure that you will have the zeal to continue working. Of course, finding employment offers that are worthwhile at that age is a colossal challenge as well.”

Envisaging post-retirement requirements

Besides the lack of socio-economic and financial apparatuses for the benefit of senior citizens, the undercurrents of change in the society also have a bearing on your retirement life. Ajoy Chhabra, a chartered accountant based in Ranchi says, “The joint family system is no longer thriving and gone are the days when there was a certainty that your children or extended family would be around to lend you a helping hand post-retirement. It has thus become extremely important for senior citizens to have accessible and liquid funds that offer decent returns and carry negligible ripple effect to ensure their security. The key to leading a happy retirement life is to ensure that you have enough so that you aren’t compelled to compromise or give up on your standard of living.”

A large chunk of the population of senior citizens in the country is dependent on interest rates for meeting their household and medical expenses. But given that interest rates can pale in comparison to the inflation rates, especially if it is galloping, retirement planning needs a broader approach. Vikas Gupta, CEO at Omniscience Capital says, “”Today a healthy senior citizen at 60 has around 30-35 years of life expectancy. This means that they cannot depend only on interest rates given that inflation will cause their living expenses to go up. They need to allocate at least some portion to growth investment avenues also so that it can match or beat inflation. So, the older strategy of allocating 100% to fixed income instruments cannot be applied anymore. Depending on the situation, the senior citizens, on the advice of their advisor and financial planner, can allocate to equity and fixed income mutual funds separately, viewing the equities mutual fund allocations as “growth investments”. Every 3-5 years, or when there is a significant increase in the corpus value, a portion of the equities allocation can be moved to the fixed income allocation to take care of the increased expenses due to inflation.”

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund