Sometime back, the Government of France proposed to increase the retirement age in France from 62 to 64 years. And this proposal saw a lot of protests. But people are living longer, healthier lives and the birthrate is at a historic low. That is, with increasing life expectancy and a lesser number of young people (being born) and joining work, there are chances that many other countries (with similar demography) may consider raising retirement age.
In India, the retirement age for most is around 60 years. And while there have been discussions in power corridors to increase this, the ground reality is that one should not rely on this happening. So while your parents and grandparents retired at 60, and you too plan to do that, the actual reality might be different. What does that mean? If you are approaching the middle ages, then prepare yourself for something unexpected. As there are reasonably high chances that retirement for many of the present generation will be earlier, longer and costlier. All these point to one single thing – you need to save up a big enough retirement corpus. And consequently, it means that you need to start saving early. Also, don’t just rely on your current job skills to help you earn later. Keep upgrading yourself in other skills to make you immediate smarter so that in a few year’s time, you have some other skills that can be monetized to generate additional side income to supplement your regular salary income.
Read the earlier statement I made again – There are reasonably high chances that retirement for many of the present generation will be earlier, longer and costlier.
No doubt, it will be a scary situation.
So not only will you retire (or be forced to retire) earlier than 60, but you will also live longer (isn’t that good to hear?).
And while many people feel that it is time to retire the concept of retirement, I think one should still save for retirement years even if they don’t want to retire. I have written earlier about why everybody needs to start saving for Involuntary Early Retirement even if it’s not their goal. I want to extend on that thought.
Imagine you are forced out of your job (let’s say) at the age of 52-53. What are the things that you should know:
- You retired early. Even if you didn’t want to. It may be due to any reason. And chances are that at this age, you will find it difficult to change careers or find a similar-paying job quickly.
- You will live for long. This means that you have more years in retirement to support yourself. Assuming you live up to 85, you still have 30-35 years of post-retirement life to fund! You will need a big retirement corpus.
- Your expenses will be higher. Not just because of inflation. But also because of new lifestyle expenses that have crept in due to changes in our lives in the last decade or two.
- Your medical expenses will increase. Since you’ll be living for a very long time, medical expenses are expected to increase as grow old. Don’t expect every expense to be covered by health insurance.
Being young today you might feel like saying that – ‘I don’t need a retirement plan.’ But retirement is just not what it used to be in the 1960s, 1970s, 1980s or even 1990s. Things have changed dramatically. Just look around you. And don’t have the false sense of security that you will have decent employment till the age of 60. Things can and will change. So many industries are getting disrupted. And not just by Artificial Intelligence. Who knows what might happen tomorrow? You need to prepare yourself.
Note – Don’t assume PF will be enough for retirement
I agree that it’s natural to try and prioritize your immediate needs over long-term savings. But this is not correct. Just having a good income does not assure you of a comfortable retirement.
I still find it very strange that many people are willing to risk their retirement by not planning for it.
Remember…
Retirement is not optional. It will happen one day. Voluntarily or Forced. And you really can’t afford to fail. You won’t get loans for your retirement.
So please wake up if you still aren’t doing anything in the name of retirement savings.