The Changing Dynamics Of Retirement

Let’s face it – the dynamics of retirement are changing rapidly; and with these changing dynamics, millennials need to start thinking ahead and adapting their retirement plans to a very different retirement than what our parents – or their parents – are living. Keeping these six points in mind may help you understand why prioritising your retirement planning goal may be the smartest thing for millennials to do right now.

You’ll live longer

Life expectancy in India is at around 70.19 years today, and the U.N projects this figure to go up by another 5 years by 2050. If you’re an urban Indian, you may well live 10-15 years more than the average when you finally decide to hang up your work boots. That means, by traditional parameters of retirement, that you’ll need to fund as many as 35 non-earning years for yourself and your spouse.

You’ll become redundant sooner – but will need to work longer

Studies show that top managers are becoming younger, and corporate employees are getting redundant faster. Unless you’re an entrepreneur, you’ll likely become redundant by the age of 50 to 55; but will need to continue working post that. You may want to start planning your post-retirement career (such as consulting or teaching) right now and start taking steps accordingly.

You’ll need a lot more

If you’re a millennial, you’ll need a lot more money to retire comfortably than you think. And to this end, you’ll have to save well in advance – and aggressively – to tide through a lengthy retirement phase with no steady income stream. Numbers can help you put this into perspective.  35-year-old spending Rs. 1.5 Lakhs today would need around 6.43 Crores to ride through a retirement of 15 years. Add another 20 years to that retirement period, and the corpus requirement jumps to Rs. 15 Crores! Needless to say, increasing lifespans mean the serious and tangible risk of outliving your savings, and no last-ditch efforts will help you in this regard.

Pension? Nope

Look around you – how many people do you know who work for more than 10 years at a single job? Gone are the days in which people joined a ‘good’ company after their post-graduation and worked their way up slowly but surely up the corporate ladder. Most resumes these days look like shopping lists – and the obvious fallout of that is that you’ll not be entitled to a pension later. Your only option would be to save aggressively in ‘defined contribution’ schemes such as the NPS or Mutual funds, to build out a sizeable retirement corpus on which you can make bite-sized drawings after you retire.

High medical costs

Lifestyle diseases are on the rise, and that’s not a trend that’s going to be bucked anytime soon. Factors like pollution, smoking, pesticides in food, stress, and a lack of physical exercise are resulting in lifestyle diseases in India assuming epidemic proportions. There’s no saying exactly how this will impact medical costs that millennials are going to incur 3 decades hence, but the picture sure doesn’t look pretty. It would be a very wise move to take up a health insurance plan and renew it religiously, accruing no claim bonuses as you go along. Don’t make the mistake of relying completely on your company provided medical cover.