WHY TO PLAN YOUR RETIREMENT NOW BEFORE IT IS TOO LATE

We all like to plan for the future. From planning the day ahead to planning a vacation, it’s a good thing to plan for something well in advance. But, when it comes to planning for one’s retirement, not many show the same inclination. Hardly surprising, therefore, that a retirement survey conducted in the past showed that nearly 78 percent of Indians had not even started planning for their retirement.

- Sanjiv Puri

Although retirement is one of the most distant financial goals, it is in our own interest not to ignore it. Rather, an early start for this distant goal is easier to handle than a goal that would come knocking early. Here are some reasons as to why one needs to plan for one’s golden years especially during the earning phase of life.

Increasing life expectancy

With increasing life expectancy, the non-earning period in an individual’s life is expanding. Someone retiring at age 60 after working for 30 years could live on for another 30 years or more. What it means is – 30 years’ earning period feeds the 30 years of non-earning period! This is essentially the 30-30 rule in retirement planning.

Early retirement

More and more people are planning to retire early. But this would require a larger corpus to retire with. Earlier, people typically used to retire at 60 years of age but nowadays many look forward to retire by age 40 if not 50. With changing corporate work culture, many could be forced into retirement by the time they turn 45 or 50.

Cost of living

Year-after-year, the cost of living is increasing. Sample this: Rs 50,000 monthly household expenses will be close to Rs 1.70 lakh (3.5 times) after 25 years, assuming an annual inflation of 5 percent. Inflation will be active even in the post-retirement years and be more pronounced as there won’t be any income during these years.

If one seems comfortable with a crore of corpus, let’s look at its worth or the purchasing power after 15 years at 5 percent inflation. Rs 1 crore will fetch you value of about Rs 48 lakh!

Cost of delay