Millennials or the new age generation (those born after 1980) are not preparing adequately for retirement and will be unable to retire comfortable, reveals a Willis Towers Watson study.
The report titled ‘Understanding and preparing for retirement adequacy in India’ shows that millennials in India feel they are less likely to be better off during retirement than their parents. Increasing medical and education expenses as well weakening joint family systems are some of the key reasons for this concern.
“The responsibility of saving a sufficient corpus for one’s old age largely falls on the individuals themselves – a daunting task considering escalating living costs and increasing longevity,” says the report.
Predicting post-retirement living and medical expenses can be extremely uncertain, thus making modelling for the next 30 to 40 years even more challenging. Longevity, especially, is a risk that could overestimate adequacy of post-retirement income if not factored into the model appropriately. A further challenge lies in converting the lump sum available on retirement to a regular income in the post-retirement phase.
In a press release, Kulin Patel, Director, Willis Towers Watson India says, “Various Willis Towers Watson studies have revealed a discomforting observation that employed millennials are not confident of their planning for retirement. Ironically, this is despite Indians saving more than their counterparts in the western world. Some of the potential causes for this concern are lack of awareness, unrealistic assessment of what to expect on retirement and short-sighted approach to retirement savings. However, India’s young demographic profile, affords employers and employees a window of opportunity to begin effecting simple and tangible steps to tackle the critical issue of retirement inadequacy.”
Dearth of retirement products
The report offers some suggestions to increase the level of awareness about the importance of planning for retirement in India. The report says that while there is an increasing focus on retirement planning and products, there is a dearth of good retirement products in India. The report suggests a level of awareness of the products like mutual funds, insurance products, NPS and other saving options should be created to focus on retirement planning.
Also, in case of employer sponsored benefits, employers should use retirement planning tools to understand the effect of their retirement plans on the overall savings for employees and must play a key role in educating them.
The findings are based on the Willis Towers Watson Savings Attitudes Survey which covered China and India.
