We all know that planning for retirement is crucial to ensure you can enjoy a comfortable future once your working years conclude. However, according to a recent study1, the majority of urban Indians interviewed worried that their savings would not even last through their retirement. A sizable 38% believe that investment planning for retirement years should start as soon as one starts earning. But not many can wrap their heads around how to plan for what may seem like the distant future. To make things clearer, we examine what the years leading up to retirement might look like. As we conclude our Work It! Series, we overview situations such as scaling back your hours and transitioning to a part-time position and ensuring your pension fund, savings and investments are enough to support your post-work lifestyle.
Winding down from the workplace
In India, the official retirement age is 60 (58 for those working in the private sector). However, with people around the world living longer and healthier lives than ever before, our attitudes to work and retirement are shifting. More older people are choosing to remain employed and many find that taking control of when and how they retire not only provides them with more money in later life but also has a positive benefit on their health and wellbeing.
As you consider what work might look like in your 50s, 60s and beyond, you could think about:
Self-employment This is a popular option for many older workers who want to harness their previous roles and specialist knowledge while gaining more control over when, where and how they work.
Flexible working Asking your employer about flexible working or part-time hours could provide a bridge into retirement while ensuring your workplace continues to benefit from your skills.
Appointing your successor You’ve worked hard to establish and expand your own business, so as you approach retirement you might want to consider finding someone to manage more of the day-to-day responsibilities so that you can take a step back with added peace of mind.
Volunteering and mentoring Similarly, you could look to put your experience to good use in a voluntary capacity. While this might not be a paid position, there are plenty of non-financial benefits to consider and recent studies have identified a link between volunteering and improved mental and physical health and life satisfaction2. Alternatively, you could pass on your expertise to a new generation by becoming a mentor.
Preparing for every eventuality
A PGIM Retirement Readiness Survey 20203 of over 3000 people revealed that the majority of Indians do not have a retirement plan. According to the research, only 52% of respondents knew how much they needed for retirement.
So how much money do you need to retire? There’s no single answer, but it might help to think about how much you’ll require each year to maintain your lifestyle in retirement. For example, will you need to keep making home loan repayments, are you hoping to help your children get on the property ladder themselves, do you plan to take several holidays each year? Many people decide they’ll need around half to two-thirds of their final salary (after tax) in order to be comfortable, so keep this in mind as you check whether you have enough in your pension fund to deliver that income.
It’s a concerning reality that many people’s funds fall short, so it’s important to save as much as possible during your working career. Remember, it’s never too late to supplement your workplace pension by contributing to a personal pension plan, such as the Future Generali Lifetime Partner Plan, which provides protection to your family, along with a regular income up to age 100. With this plan, you get an increasing guaranteed income, in addition to an annual cash bonus, if declared. The guaranteed income duration and amount depends upon the plan option chosen. You can choose among yearly, half-yearly, quarterly and monthly frequencies to receive income, according to your needs. What’s more, you may even be eligible for tax benefits on the premiums you pay and benefit proceeds. It’s worth exploring these options if you haven’t already at this stage of your career.
Meanwhile, you can prepare for unexpected expenses, such as the cost of medical treatment, by having a health insurance policy in place. Even before you require it, taking out this kind of critical illness cover could ensure your finances are protected should you need to take a prolonged period of sick leave. Similarly, having savings and investments in place can prove useful for a variety of reasons, for example, should you find yourself facing redundancy, to make up for reduced earnings as a result of moving to part-time hours, or to supplement your personal pension fund.
Need help while planning your retirement? To make a comprehensive retirement plan, feel free to connect with our trusted financial advisors today.