For an average person who’s planning for retirement, it is important to be first aware and second, have the ability to face that reality
The third edition of Outlook Money’s 40After40 Retirement event got underway in Mumbai on February 7, 2025. V. Vaidyanathan, managing director and CEO of IDFC FIRST Bank, addressed the gathering on the theme of ‘Celebrate Retirement’. He quipped that ideally, no one should retire.
“But since you mentioned the topic is retirement planning, I was sitting there thinking—no one should really retire. I mean, no one has to retire. But then again, a time will come when, like a realtor showing up at your door, your work term will naturally come to an end,” he said.
He said that if one thinks of retirement as an endpoint, there is nothing to look forward to, which should not be the case.
“Honestly, while I’m sharing my thoughts with you, I’m not considering retirement at all – it’s just not on my mind right now. But that’s also because I still have a long career ahead of me, with an institution to build and things to create,” he said.
Work Is Beyond Money
He said it’s important that people to be involved and engaged either in social activity or commercial activity or the next entrepreneurship to build, or something to look forward to.
“After a point, it’s not so much about the money that you earn. It is more about just how to keep yourself occupied mentally, physically, to be healthy because that plays a big role as well,” he added.
Retirement Planning Is The Need Of The Hour
Vaidyanathan said that he was recently reading that 60 per cent of Indians believe that their funds will not last them more than five to10 years.
“Hence, retirement planning is the need of the hour. And one must start early because a lot of people think that they will start planning when they are older. But at that point they do not have time for their money to compound,” he said.
Awareness Is The Key
He said that being aware of your financial situation is the most important thing, as when you are 21, 25, and 26, you will be earning some money, and spending it off, and you are living your life by the day, thinking you will never be 40 or 50, you would never be 70, and you would forever be in your 30s. And then you suddenly realise you won’t have much time left and you would have a lot to save up for many commitments,” he said.
According to him, one of the biggest issues we are facing right now is medical inflation. For an average person who is planning for retirement, it is important to be first- be aware and second, have the ability to face that truth.
Now there are many schemes into which people can invest into, such as Employees’ Provident Fund (EPF), Public Provident Fund (PPF), National Pension System (NPS), and Atal Pension Yojana. If people are aware of these schemes, their money would go into this, and post-retirement they would be able to get this money, he said.
“I read about the Atal Pension Yojana, especially for the unorganised sector I was seriously impressed, because if the worker population, the blue-collar worker, they are putting some money away, government puts some money away, and then together it makes a corpus, because India does not have social security,” he said.
He said the salaried class should consider EPF, because it’s a compulsion, similar to the 401k of the US, and it is completely exempt, right from investment to maturity and even interest earning.
“You are getting about eight per cent and you know when you are taking it out, it’s exempt,” he said.
He said he is also very impressed with the NPS. “In NPS, you are contributing and they have a choice of actually letting the money go to equity or debt and if it goes in equity it gets equity returns,” he added.
He concluded his session saying that it’s very important to figure out your retirement planning math in your head. How much do you need, say 20, or 30 years from now?
“So you know that rule of 12, you divide by, you know, seven, divide the interest rate by 72. If you say inflation is 7 per cent and you divide 72 by 7, so it’s 10, which means that every 10 years, the price of goods is going to be double what it is today or your value of money is going to be half every 10 years, assuming a 7 per cent inflation. So, the tools should be able to tell you, that if you want to live this lifestyle, what you are living today, say 30 years from now, supposing someone wants to live a lifestyle, then make it up,” he further said.