Still Pondering Whether To Start Retirement Planning? Delaying Can Be Costly, Says Report

Around 60 per cent of the retirees in India do not save enough for retirement, according to the ‘How India Thinks About Retirement Building The Future Today’ study by investment advisory firm House of Alpha and strategy consultant Eleveight. The study indicates people’s unpreparedness for retirement, and even those who prepare for retirement, around 68 per cent exhaust their savings within 10-15 years of retirement.

The study was conducted with over 1500 people between 40-75 years from higher and middle-income groups in five cities: Mumbai, Delhi, Bengaluru, Chennai, and Kolkata. The study refers to the demographic shift in India in which the senior population is going to almost double by 2050 compared to now. This change in demography needs careful planning on the individual part because there is no adequate pension security for all.

Healthcare and financial planning emerge as the most important aspects retirees feel should have taken better care of. Around 72 per cent of respondents consider healthcare a critical area in retirement planning, whereas 63 per cent consider financial planning critical.   

Notably, the data shows that most of the respondents know about retirement planning and when to start it, but very few actually take action. As per the study, 63 per cent of the respondents strongly agree that retirement planning is crucial, and only one per cent disagree.

Why Retirement Planning Should Not Be Delayed?

It highlights the macro-level reasons, and why one should take this into account in their retirement planning.

Living And Healthcare Cost: It emphasises the rising cost of living and healthcare. As medical inflation reaches around 14 per cent, it is difficult for anybody to spend on healthcare if not planned for prudently. According to the report, only 18 per cent of senior citizens in India have health insurance. The rest of the people, including seniors, either take loans or pay from their savings for medical emergencies.

Dependency Ratio: The dependency ratio is increasing in India with the changing demography. By 2050, it is expected to be 61.2. It indicates a higher number of elderly's dependency on income earned by the younger generation, denting their (younger generation) pockets because they (elderly) do not have enough pension coverage. At present, 78 per cent of the elderly have no pension plan, reads the report.

Retirement Corpus: Another point the report highlights is the country’s retirement corpus. “India’s retirement corpus, currently at Rs 45 trillion (16.5 per cent of GDP), pales in comparison to OECD (Organisation for Economic Cooperation and Development) nations, where the average corpus exceeds 80 per cent of GDP, and in a few of these countries, the retirement corpus is 200 per cent of their GDP”, it reads. It underlines the gap in India’s retirement corpus in comparison with OECD nations. India legs on this front.

Costly Senior Living: The study also throws on the changing family structure, rising number of nuclear families, long working hours, and less time for family and ageing parents. This has led to the idea of senior housing projects. These residential projects are only for the elderly, but they are high-priced. At a time, when basic living expenses are rising, a similar lifestyle after a few years necessitates robust financial planning from an early age.

However, retirement is not only about managing finances. It is more than this.

Loneliness: As per the report, loneliness and social isolation among the elderly are growing concerns. Senior living communities address this issue, but it involves a cost and everyone may not be able to afford to buy a house in the senior living communities having facilities for age-related issues.

The report underscores the importance of an early start for retirement planning, harnessing the power of compounding, and building financial security. It also highlights the need for collaboration among policymakers, regulators, industry players, and financial advisors to create the framework to provide retirees with a secure, purposeful, and dignified life.