Of course, you don’t die. But isn’t that a bigger risk?
Updated: Jun 8, 2019
There was a very good response to my earlier post Of course, you don’t die. But what if you die?. People thought about the risk of death. It was circulated in many whatsapp groups and other social media. Some people were still not bothered, as they were reasonably confident of not dying. Targeting those people now, as the objective was to scare everyone, no matter they die or live.
Living longer seems to be a bigger threat than dying young. Let’s first take the example of a person who is saving money adequately for the retirement. Assuming he would buy an annuity at the time of retirement with this money, is that going to be really adequate? Inflation is the devil here. Whatever money saved, would it be sufficient to continue the standard of living after retirement? Even if it would at the beginning, would it continue to be sufficient till death of the person (around 30 to 40 more years) is the big question? The cost of living is increasing very rapidly due to inflation. Just imagine, what was the cost of any commodity 10 years back and what is it now? Hence the sufficiency of any fund created for retirement is questionable.
Now, let us come to those people who invest some money in some retirement plan and think that they are saving for retirement. Since there was a separate tax limit of Rs 10,000 earlier, I know many people who bought a retirement plan for an annual premium of Rs 10,000 and thought they saved enough for their retirement. This would build a corpus of around 2 to 5 lakhs depending on the term of the policy. What would be the value of that money at retirement?
And there are many people who have not started thinking of retirement savings yet.
The current generation of working population is running a big risk of not having adequate financial resources after retirement. Blessed are those people who have pension benefit with some inflation linked hike. But these people are very small in number.
So, what’s the solution? start saving for retirement. When to start? earlier the better. Retirement saving is not something that you start after age 50. And more importantly, invest in those assets that could grow with inflation. Equities, property and any other investment that could grow with inflation. It need not necessarily be direct investment, it can be through indirect instruments like ULIP Insurance policies or mutual funds. But the key is, your investment should grow with inflation. You don’t want to realize after retirement that you don’t have enough funds to generate decent regular income. It would be too late. So, start saving adequately and invest appropriately for retirement.