REALITY OF RETIREMENT PLANNING IN INDIA
Most of the working people in India do not plan their savings towards retirement due to some misconceptions:
1.My PF Fund is enough :Some people think that their savings in the PF will be sufficient enough to meet retirement life.12% of basic salary in every month with interest rate @8.75 p.a. may not give needed fund for retired life.
2.My kid(s) will look after :Indian joint family culture fading away rapidly and nowadays it may not be prudent to believe such things.There is uncertainty attached with this emotional thought process which needs to be look into on present scenario of society.
3.My priority is Children’s Higher Education :Large number of working people having children put priority to their children’s education before retirement plan.But retirement planning is such an important decision which one should not neglect or delayed for other reasons.Every year of delay may put pressure to invest higher amount to meet right corpus for retirement fund.
4.I need small amount to live after retirement :This myth is very dangerous for people who think it because you are ignoring the cost of inflation which always is there in our life whether we are working or not.
5.I am investing in FD & RD :Without knowing your need at retirement just putting money in one instrument is not the best plan for retirement. Diversified portfolio can ensure your retirement fund.
6.I have enough time to think it in future :This might be call of a young working man or woman but they may not realize the value of time.Early investment towards your goal will not put any burden in the future to live normal life.If someone put hold his retirement planning then he or she may have to invest extra money in retirement kitty because he or she is ignoring Power of Compounding.
7.I invest in Property :This one is good for certain limit but not for the whole portfolio of investment.Meltdown in the year 2008 and onwards has proved those people wrong who thought property was the best investment.Above all, property is not liquid asset and even it may not give money immediately for sudden large expenditure.For liquidation, you need some procedure which will take time.
8.I don’t believe in planning for retirement :What,if I die before retirement?With this logic some people avoid retirement planning.But the question is if you live beyond your retirement and have not enough funds what will happen?Death is certain but the time of it is unknown so why you avoid retirement planning for that uncertainty of life?
There are many other reasons which can cause delay or neglect to plan for retirement.