INCREASING LIFE SPAN
The average life span of an individual is rising in India in tune with the trend witnessed across the world. The life expectancy figures point to a rise in the average life span. Across cities and towns, it is becoming very clear that a lot of people are living for a longer period than before. Better medical facilities, nutrition, and hygiene have contributed to this phenomenon.
Currently, a large part of the Indian population is young, but as this part also starts growing older and the number of middle-aged people moves towards old age, the figure in the higher bracket will keep increasing. The first thing that each one will have to think about is whether the assets they have accumulated during their lifetime will be enough for them to last out the remaining portion of their lives.
NO FIXED RETURN
Planning and keeping aside certain sums for retirement is not a new concept in India as traditionally Indians have been big savers. The savings habit to put away money for tough times has been around for a long time and ingrained into the average Indian. Over the years, people have been saving for retirement without actually using the process of retirement planning. This was possible and also easy to implement because in those days, the rate of return on most instruments was high and one could easily plan for investing a specified sum into a certain area and predict very easily what part of the earnings will be available for use.
IMPACT OF INFLATION
Simply put, inflation means the rise in prices that actually eats away the purchasing power of individuals. This means that inflation will keep on reducing the value of your money every day and year into the future.
This factor of inflation can be considered from two angles. First, the worth of money today will be more than that of the same thing tomorrow or at some later date. Then, if you need a certain sum to buy a certain amount of goods or services today then just a few years down the line you will require a larger sum to buy the same thing and keep up with the pace of inflation. Inflation is a beast or a demon that never stops or tires and it keeps rising year after year.
FALLING RATES ON FIXED RETURN OPTIONS
Earlier, it was possible to maintain income during retirement by selecting various debt instruments for investments. There were certain options in the capital markets whose rates were fixed. These rates were high and hence there was no need for any kind of effort to earn from the savings.
In addition, several of the options in terms of investment avenues too have closed down reducing the routes for investments that one had gotten used to. In their place, several new instruments have hit the market but here there is no assurance of high returns. In most of the instruments, the return is also linked to conditions in the overall markets like debt and equity and hence they will perform only when the conditions are good in the various markets where they invest their corpus.
NO SAFETY NET
The worrying factor for most people in this country is that there is no safety net for them. Several countries in the West have some social security benefits. But in India, a person is left on his own to fend for himself. There is no element of safety that one could count on as a backup. One way to tackle this is by providing for oneself through retirement planning efforts. While it might be a tough way ahead there is an element of comfort and support that people will bring to their own lives once they start the process of retirement planning.
OLD METHODS WILL NOT WORK
Whenever people face a problem, they are fond of saying they have tackled such issues in the past and know how to deal with them. This is not always easy in the fast-changing world of finance. Is this actually true or just an attempt to scare people to get them to buy various retirement products? Let us find out. Until a few years ago, one could use the traditional investment avenues available like provident funds, insurance policies, and bonds and deposits and save for retirement and then use this money to meet the needs during their old days. The investment avenues were simple and limited. The entire sum was put into debt instruments where one could live off the interest earned. The capital remained safe and the regular interest part met the needs of the individual. Now, circumstances have changed. The interest rates have plunged and this means one needs huge sums of money that will never be accumulated during the lifetime of several people to ensure that one is able to retire and maintain the same kind of lifestyle that one was enjoying before retirement. Hence the old way of doing things would have to change and at the same time, better investment tools should be used in the planning process to arrive at the same results.
BREAK DOWN OF THE JOINT FAMILY SYSTEM
Earlier, the joint family system was widely prevalent in the country, which meant people in their old age could rely on their sons and their family to take care of their needs. Now, this system has been breaking down and in many cases, the parents find that their sons and daughters are working at a place far away from where they are living. It also means that there is less of a support system prevalent today than what was witnessed some time ago.
The Indian family is also going nuclear which means that the kind of support that parents used to enjoy from the family is slowly diminishing. This shifts the onus on to the individual to ensure that they do the entire planning for themselves as it is the only route left for them to protect themselves from the situation that will experience in the latter stages of their lives.
There is great uncertainty in life in the modern world. Every day one hears of some new development that impacts the way in which people live. All this requires them to be alert and ready for various eventualities and uncertainties that could crop up at any moment. In case there is no retirement planning then there is a strong chance that an individual will be vulnerable to any shock that takes place.
INCREASING MEDICAL COST
One of the biggest expenses that one faces in the latter part of our lives is hat of medical expenses. The cost on this front is rising year after year and this adds up to quite a neat sum. To tackle this situation one has to undertake the required retirement planning to ensure even heavy medical costs can be tackled. Due to the rising cost of medicines and services, access to quality care requires a large sum of money but retirement planning can provide some relief in this matter.
People would like to spend some leisure time doing something that they actually like during their old age. For many, this is one of the big objectives that they have set for themselves. All these are considered s non-economic objectives that require the necessary amount of retirement planning. There are various leisure options to choose from. Enjoying these pleasures would be possible only when one has done enough to ensure that there is no day-to-day worry about money.
COPING WITH FAMILY HEALTH PROBLEMS
It is not only the health problems of oneself but even of those around us that take our time and efforts. The changing lifestyle of Indian families has meant that there are a lot of new diseases. This also requires time and effort from people in their old age and with effective retirement planning one would be able to help in these matters too.