Why retirement planning?

In today’s fast pace life everyone is busy working hard to earn a living for their family. With an enhanced lifestyle everyone wishes to own a flat, and live a secured and peaceful life ever after. But little do they realize that they need to plan for their future retirement. About two decades ago everyone was happy earning 3 to 10k each month and investing a part of it for their retirement days. They always thought that their PF contribution will be able to suffice them post retirement. Things have gone worse since them. They were not able to judge the rate of inflation in consumer goods and till date feel that they could have invested more in their salaried age.

Present scenario is a little different. Everyone wants to lead an enhanced lifestyle and is not happy with the basic food, clothing and shelter. They require an air conditioned car, an LCD television, a centralized ac flat and so on. Wants keep on increasing with increased salaries, residential complexes, Iphones and shopping malls.

So what is it that one should realize. It is of utmost importance to know what you should be saving year on year to build an appropriate retirement corpus. One needs to take advice from a financial planner to ascertain the actual retirement corpus required and a proper asset allocation to achieve this amount on time. A retirement corpus can be built by a disciplined investment approach in varied investment avenues of equity and debt. Following are the reasons important for building up a retirement corpus:-

Fulfill other goals: Every individual goes through various life stages. A married couple has goals to own a house & a car, education and marriage of their children and so on. People tend to forget that they have to retire some day and live on their own, when there would be very minimal or no income flow at all. People work hard and save harder for their children and ignore building a corpus for their retirement.
Inflation: A minimum bus ticket that used to cost me 25 paise 15 years ago is costing Rs. 3 now. An increase of 18% p.a Did you realize that? Similarly there has been an increase in all commodity prices. We can’t imagine what would be the cost of these commodities post our retirement. Hence our expenses would increase making it difficult for us to provide for monthly expenses post retirement.
Increase in life expectancy: Not only inflation but due to advancement of science and technology the life expectancy of an individual is increasing year on year basis. This comes with additional pressure to provide a regular income for years after retirement.
Nuclear families: People have started living in nuclear families. They do not wish to stay with their parents, instead prefer a house with wife and kids. Hence, overall burden of the house rests on parent’s shoulders, even when they do not earn any income.
Medical expenses: As age progresses, expenses borne toward maintaining a healthy life increases. There are huge expenses to be borne on account of medical emergencies and towards the cost of regular medicines. Even mediclaim insurance reduces or provides no cover as age progresses. People have to create sufficient emergency fund to cater to these expenses.

A word of advice: Do not forget that you need to accumulate wealth for your life post retirement. Your PF contribution alone won’t suffice. Start early to plan for retirement, follow a disciplined and systematic approach towards investing and invest in a proper asset allocation to gain maximum returns.