Plan for continued income flow post retirement
The objective of retirement planning is to balance the income and expenditure during the post retirement dependency period. Till recently, most of the aged people lived with their families after retirement with or without any pension or any plan for self-dependence.
However, as discussed in our earlier article, Retirement Planning – Start now, Save more, Retire rich, with changing demographics of Indian society, now things have already started to look very different. Without a proper retirement benefit plan you will no longer be able to sustain yourself after retirement!
Demographics : The Indian scenario
The demographic situation in our country is more or less in line with the global trends. The life expectancy, as on 2007, for males at birth is 67 years and 71 years for females. This is a consequence of enormous advantages to the society contributed by economic and social changes, technology transformation and the continued innovations in the field of medicine.
With further advancement in medical technology life expectancy is likely to increase. It is projected that the life expectancy would reach 73 years in the year 2025. By the year 2016, the Indian population is expected to grow by 49% over the figures as per 1991 census. But during the span of the same 25 years, the growth in the population of senior citizens (i.e. people above 65 years of age) would be more than double that of the population growth.
The life expectancy of the Indian population, is expected to be around 80 in 2020 causing a big rise in the country’s dependency ratio. (The dependency ratio is the ratio of the number of people below 18 years and above 60 years of age to the number of people in the working age group of 18 to 60)
The joint family system which gave a sense of security to the old people is now getting disintegrated very fast and the absence of any organized social security system as well as the ever increasing cost of health care will have an adverse effect on the well being of the ageing population.
State of Organized Retirement Benefit Schemes in India
Only one third of the Indian population is working population and that includes the self-employed. Out of these, only 11% have a regular scheme of retirement benefit. The remaining 89% of the working population does not have any organized retirement benefit scheme and a vast majority of them may not be able to plan for their retirement on their own.
It is this segment, which is likely to remain without a proper economic security during their old age. Hence, the importance of retirement planning for our country does not require any further emphasis.
Need to create continued income flow post Retirement
In the given circumstances it is imperative to think about the following issues affecting you personally and/or your family.
- The level of ‘standard of living’ you would like to maintain after your retirement
- Your present capacity to save (disposable income) to provide for a regular retirement income and simultaneously to create other income depositories.
- Your estimated life expectancy at the time of retirement.
- The additional responsibilities that you have to shoulder on your retirement, depending upon your family circumstance and the dependents that you might have.
- Provision for unexpected emergencies, like hospitalization, accident etc.
To maintain a steady flow of income post retirement you need to create a dependency provisions and income depositories for yourself as well as your family by regular savings, careful planning and a balanced portfolio of investments. It is a known fact that any retirement benefit can be built over a period of time only by setting aside a certain proportion of the income earned during the working span.
Still thinking about the best time to start? The earlier you do, the better it is. Go invest for your retirement. Now!
He has authored several analytical articles on personal finance in The Times of India and The Economic Times. Being a finance geek and having been involved with internet since the early days of the medium, he was a great help and source of guidance while formulating personalmoney.in. You can know more about Manish at ManishMisra.com
Disclaimer : Manish has agreed to write in his personal capacity. Views, opinions expressed in his articles are his own and do not necessarily reflect the views of his employer.PersonalMoney.in