A report published by United Nations titled ‘UN World Population Prospects’ says that in 2050, the number of dependent adults in India will reach the number of dependent children for the first time. The report stresses that that retirement planning is the need of the hour for India.
This will bring a variety of new social, economic and health care challenges many of which need to be tackled today.
Let’s look at the factors that are changing the retirement trends in India.
Higher life expectancy
With better healthcare facilities and improvement in the standard of living, the life expectancy has increased by 10-15 years. The question arises that ‘Are we prepared to face the challenges of India’s elderly population?’
Suresh Sadagopan of Ladder7 Advisories says, “Earlier, improvement in life expectancy was not a concern. But with changing times, it has become essential to look into the matter of increase in elderly population.”
Emergence of nuclear family
The emergence of nuclear family systems has led to breaking down of joint family system in India. Earlier, people assumed that the younger generation will take the responsibility of looking after them. But now, people are aware that post-retirement, one may not live with their children or get a significant monetary contribution from them. Thus, the challenge is to ensure that the elderly population manage their expenses independently.
“We have seen few clients who do not stay with their parents. Also, we have seen that the elderly are managing their expenses on their own. With the increasing number of old-age people living alone, not all are able to manage their expenses. They fall short of savings. Thus, retirement planning should be a priority for any individual,” says Nikhil Kothari of Etica Wealth Management.
Not saving enough
Though India ranks first in the retirement readiness survey conducted by Aegon, the survey also shows that Indians are not saving enough to meet their retirement expenses.
According to the survey, employees are on course to achieve only 71% of the income they will need in retirement and only 36% of them think they are saving consistently to save for retirement.
One of the key reasons why Indians are not prepared for retirement is they have been parking their surplus cash in bank saving accounts to a much greater extent than in other countries. The survey shows that 61% of Indians park their money in savings accounts to save for retirement, compared to 39% across all countries surveyed. Experts believe that people can overcome this challenge if they are willing to diversify.
“In a country like India where majority of the population prefers to invest in bank deposits and other safe instruments, selling a market linked product like mutual fund can be a tough task. But, saving aggressively can be the only solution to solve retirement problems,” says Vishal Dhawan of Plan Ahead Wealth Advisors.
Few points which advisors need to keep in mind:
- Ask clients to start saving for retirement as early as possible
- Help them in keeping track of their retirement goals
- Ask them to diversify their investments
- Make sure that your clients are adequately insured
