Retirement planning is an essential aspect of managing one’s finances. Yet it is often ignored. This is not surprising though. Neglecting retirement planning is like chain smoking. It is harmful but you don’t notice the negative effects right away. It can take decades to realise the mistake and by then it could already be too late.

If you are currently thirty years old and your monthly living costs are 100,000 INR, the same will cost 5,74,000 INR a month1 by the time your retire2. Inflation would have made everything costlier. As you upgrade your lifestyle due to rising income, maintaining the improved standard of living will cost even higher.

Healthcare costs in Tier-1 cities are already exorbitant and rising faster than inflation. One can only guess what these will cost say 50 years from now. After the age of sixty, medical insurance becomes hard to get, and does not cover all diseases. Out-of-pocket expenses thus increase significantly as we age.

The average lifespan has increased steadily over the last century because of a multitude of improvements, and continues to improve. As a result, many of us will live into our 90s. We will work for 40 years and potentially have 30 or more years of retirement.

Rising healthcare costs, a long retirement period and inflation therefore make financial preparation for golden years critical.

Earlier generations could afford not to care about finances after sixty since they did not expect to live that long. A small Provident Fund (PF) combined with other savings lasted their remaining life. Healthcare wasn’t too expensive either.

Many people ignore saving for retirement thinking they will keep working past the retirement age. But the choice may not be upto them.

As you age, health issues, like back pain or reduced vision, may limit the types of work you can do or how long you can work. They may even force you to give up working altogether.

By the time you reach sixty, your skills or profession may have become obsolete. Who knows what skills will still be in demand decades from now? You could be laid off or may have to settle for a lower salary than earlier.

Some people brush off retirement planning as they intend to rely on their children. But that too is risky. Although you may raise your kids well, unforeseen circumstances, like pursuing higher education, career instability, or a health crisis, might limit their ability to support you.

The onus thus lies on the “present you” to secure the financial needs of the “old you”. You need to build a retirement corpus: a pool of money that can cover your and your spouse’s old age expenses for as long as you live. It would ensure that you can:

  • maintain your standard of living
  • afford excellent healthcare
  • travel and pursue activities you had always wanted to

The retirement fund will not only serve as a financial safety net but also provide you the time and the freedom to do what you want. Instead of feeling forced to slog for money you would be able to live life on your terms.

Keep in mind that while saving is necessary to build a retirement corpus, it is not enough. You must invest the money correctly so that it grows enough to cover more than 30 years of ever rising expenses.

No matter whether you are 22 or 42, start saving and investing for retirement today. As the saying goes, better late than never. Your future self will be thankful.

  1. The expenses would be lower if you are currently renting a house and plan to buy one soon. By the time you retire, the home loan would have been paid off, reducing the monthly outgo. ↩︎

  2. Assuming 6% inflation rate, the RBI goal ↩︎