The quality of post-retirement life depends on the pre-retirement decisions taken by an individual
Many individuals do not give adequate attention to proper retirement planning, which leaves them with either no funds post-retirement or with a very less amount that is insufficient to meet their daily needs and give them a respectable life in their sunset years. On the contrary, some people plan carefully and start saving in a retirement fund on a regular basis. Also, there are people who save, though not enough and their savings are eroded due to various conditions. Due to improvements in the healthcare system, an individual can live upto 15-20 years after retirement. Nevertheless, several studies show that people nearing their retirement are not suitably prepared for it.
It is a general belief that the quality of life post-retirement depends on the decisions taken by an individual pre-retirement. Gone are the days when a Government job meant security in the form of a lifelong pension after one’s retirement. Now, pension for Government employees is directly proportional to their contributions to the Provident Fund (PF) account. It is generally considered that a decent retirement income is between 70-110 per cent of the current income.
However, this is an area where most people fall short. Only a small proportion of individuals are able to amass assets twice the value of their current income. And this is the cause of concern as the inflationary burden and rising healthcare costs eat into retirement savings. More often than not, the human tendency of procrastination translates into savings that are too little, too late. Researches have shown that factors like income and gender have an impact on retirement planning. The higher an individual’s income more is the likelihood of saving for retirement. Similarly, men have been known to actively engage in saving and investment planning as compared to women.
Financial planning is a determinant of financial literacy — having a wide knowledge about financial instruments and related issues and clarity about the retirement goals. These findings can be applied to customise retirement investment plans to suit individual needs based on age, gender, financial literacy and the expectations about post-retirement life. As it is evident, “one-size-fits-all” type of programmes will be failures as they do not provide any tailored solutions based on personality traits, financial and investment knowledge and unique retirement goals. Retirement investment plans would be quite different for young investors with a long-term future perspective as compared to middle-aged investors with a shorter investment horizon.
Retirement planning is much more than just ensuring financial security. It also promotes a sense of satisfaction and helps a person adjust with retired life in a positive way. It also reduces anxiety levels and encourages people to retire early. Even though the benefits of retirement planning are numerous, there is still a lack of precise motivation to secure financial and non-financial well-being by the people. The factors that predict human behaviour skewing towards retirement planning can help organisations identify people who are at risk and develop effective and customised methods to motivate them to start retirement planning. After all, retirement is the biggest coffee-break.
(The writer is Associate Professor at Amity University, Noida. The views expressed are personal.)
