I believe that when people are busy planning their children’s future like their studies, marriage, lavish lifestyle, foreign travel etc., they just neglect their retirement planning.

Retirement is that phase of life where people have time to fulfill all those hobbies and dreams which they could not fulfill at their young age due to paucity of time. However, it is imperative that people realize that post retirement there will be no regular income to meet their basic needs.

Why is retirement planning so important?

1. In the olden days people lived in joint family, so even after retirement it was easy to bear the household expenses as the younger members of the family were considered to be responsible for bearing the expenses of their elders. But nowadays nuclear families are more popular and if we do not plan properly, it becomes very difficult to meet even the basic needs after retirement.
2. Earlier the average age of a person used to be 60-65 years, which has increased to 70-75 years in today’s time. (Date Source: UN-World Population Prospects) So if a person does not plan properly for retirement, it will be difficult to meet the expenses incurred to live longer after retirement.
3. As we know that inflation is increasing day by day, the effect of inflation, which seems small in the short run, may be greater in the long run. This means that a person will have to pay more for all the expenses in the future. Thus, while doing important retirement planning, you can consider this determinant and generate enough retirement corpus for your future to lead a peaceful life.
4. No one can predict the future, in such situations it is best to be prepared in advance and retirement planning is the best way to secure the future for financial needs. Retirement planning can help you ensure that you are not financially dependent on anyone else in case of medical or any other emergency.
5. Till a few years ago, the interest rates for investments were also high, due to which people after retirement could meet their financial needs through interest income which may not be possible nowadays due to low interest rates on financial instruments. That’s why investing in a good retirement plan at an early age is even more important.

I want to explain through an example why timely retirement planning is important.

If a person is 35 years old and his retirement age is 60 years then his earning age is 25 years and we also assume here that his life expectancy after retirement is 75 years then he has 15 years to live after retirement are years.

Let us assume that if today’s expenditure of that person is Rs. 30,000 per month, then after 25 years from today the person will get about Rs. 1,02,000 to meet similar expenses (at an estimated inflation rate of 5%). He will need around Rs. 1.70 crores at the time of his retirement to meet his expenses for the next 15 years (the estimated rate of investment of retirement money is 6% and the rate of inflation is 5%). If he invests to build this retirement corpus today, he will have to invest around Rs 18,600 every month (at 8% annual interest rate).

But if he does not invest from today and starts investing to build this retirement wealth even after 5 years from today, he will need around Rs 30,000 per month instead of Rs 18,600.

Note: The above illustration is only educative in nature and is not an attempt to predict
With the help of this example I am trying to explain to you that if a person delays his retirement planning, he will need more money to deposit the same amount.

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In short, retirement planning is just as important as other financial goals, as it helps to make life after retirement enjoyable. If you do not plan properly for your post-retirement life, you will not be able to rectify that mistake after retirement.


Views are personal: Author – Manish Maheshwari Investment friend™ MFD is a mutual fund distributor

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