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Samiksha was in a cab on the way to office when the car halted at the signal. She sees an older lady trying to cross the street scurrying as fast as she could with her limp and clearly struggling. “She should not try to get out of the house at this age,” Samiksha said softly.

Ritu, her colleague in the cab looked up from her mobile and said, “She has things to do, right? Will you sit at home all day when you grow old?” Who thinks about life as an old person, thought Samiksha to herself.

Samiksha doesn’t, and neither do 77% of Indians, according to an RBI report. Over 44% of Indians do not think that people like ‘them’ could retire and another 33% said they have not given it much thought.

The report also forecasts that even by 2031 this figure is unlikely to change.  Over 50% of Indians above age 65 are likely to be dependent on their children rather than on the wealth they create for themselves.

One of the most searched Google terms around new year is how to start saving, tied with how to exercise and how to eat right. Regardless of how you feel about resolutions, January 1st seems like a good date to nudge for things to change. Fresh starts, turning over a new leaf or changing the way things have been. Planning and saving for retirement could be the new thing you start this year, which could help you for a lifetime.

Starting too late
When you’re busy scrolling down for the next cool purchase, how can you possibly picture yourself old? Retirement is so far away! And yet, we see that growing number on our birthday cakes every year.

But because it’s far away, now is a great time to start planning for it. We all have life ambitions, and those shouldn’t change because income inflows stop. Starting retirement planning early gives us the advantage of time to build a second income and a corpus for when we can’t earn a salary anymore. Thinking of postponing this planning to later? That’s probably not a good idea. Research suggests that those who start late tend to take riskier investments to meet their financial goals. So if you have started earning your paycheck, it’s probably a good idea to start planning for the day you will stop!

Tougher than your parents
Thanks to better medical advancement the average life expectancy has increased. While numbers vary depending on environments (rural vs urban) and gender, the average life expectancy of Indians is around 70 years. This is the average, which means a significant number of people will outlive that age. We also want more from our lives.

Ever so often we hear 50 is the new 30, all indicative of the way we want to look at our life choices. We indulge in more interests and hobbies than ever before. So a longer life, coupled with inflation and more expenses all add up to requiring a larger amount for retirement.

Covering ourselves too little
But what should that amount be? That is a decision you must arrive at after considering your life choices. A simple calculation can be, for example:

  • Expected age of retirement (say, 60 years) minus current age (say, 25 years)=number of years to prepare. (35 years)
  • With the average Indian life expectancy at 70, by the above calculation, you have at least 10 years of retired life to provide for.
  • If you want a similar lifestyle that you lead today, calculate the monthly expenses after you factor in inflation (inflation is the rate at which prices are rising – currently at around an annual rate of 5% in India).
  • This amount multiplied by 12 months for 10 years (remember, inflation is annual, so make sure you factor that in!)  is what you will need as a corpus for retirement. Any investments you make should be able to lead you to this goal.

Women need to save more
The gender pay gap and taking career breaks are some reasons women are not financially on par with their male peers. Add higher life expectancy to this and some reports suggest that women must save almost double that of men for a similar retirement life.

Be the boss of your finances
So, how do you start? By being mindful and educating yourself and most importantly, taking ownership of your own finances. What do we mean? You already earn your own money and spend it the way you like. However, are you just going with the flow or are you telling your money where to go? Owning your finances is not just having the ability to spend but also the forethought to plan and invest it. Whether you want to travel places or go for the comfortable den for retirement, your money is the fuel. Ask yourself, “who is the boss of my finances?” If the answer is anything but “me”, then things need to change!

Retire like a Rani, by taking ownership of your finances today.

From all of us at Basis, here’s wishing you a financially independent and fulfilling 2019!

 

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