Skip to main content

Retirement: Plan retirement or stop buying potatoes

For Indians in their 20s and 30s, the accumulation phase—when they earn and save—is of great import for retirement. And insurance products can help

THIRTY years ago, a kilo of potatoes sold for less than a rupee in Bombay. Since then, not only has the city changed its name to Mumbai, it but nowhere will you find potatoes selling for less than Rs 10 a kilo. The price of onions has risen more than five times; beans sell for ten times what they cost in 1985. Local transport costs have increased more than 1,000%. Electricity costs almost four times what it did just ten years ago. Even water charges have doubled.

Rising salaries help people cope with the increasing cost of living. But what happens when income from regular sources stops, and costs keep rising?

A national survey of more than 63,000 households, equally divided between rural and urban areas, conducted by the National Council for Applied Economic Research (NCAER), found that only 4% of the people could survive on their savings for more than a year if their current income were to dry up. Where have the savings gone?

The recently released report of the survey, How India Earns, Spends and Saves: A Max New York Life-NCAER India Financial Protection Survey, found that about 81% of Indian households save, but as many as 36% keep their savings as cash at home. Over 50% keep their savings in banks, 5% in post office accounts, and 3% in cooperative societies. A large number—58% of labourers and as much as 20% of salary earners—said their first choice for depositing savings would be to keep them at home.

So that;s where Indians’ savings go—into non-remunerative channels.

Thus, when income dries up, the future spells dependency, anxiety and attendant pain. India is becoming increasingly young—more than 40% of its population is below 30. Three decades from now this group will be ready to retire. They will be retiring from jobs that have allowed comfortable lives, regular holidays, eating out, mobile phones and other gadgets, and graduating to lives that may well involve more expenses, with healthy special diets and more expensive modes of transport, with loss of income, not to mention increased health insurance costs.

How will today’s 20-and 30-year-olds cope with this, unless they have planned to substitute their current income with an equivalent or higher income from other sources? This is necessary to avoid dependency, ensure security, and avert anxiety.

Retirement planning is a growing area of financial planning today, as the joint family system disintegrates, and even nuclear families grow more independent and widely dispersed. India does not have a social welfare system, offering state-supported retirement homes and other facilities, leaving senior citizens to fend for themselves. Thus, retirement planning has become an imperative. The Max New York Life-NCAER India Financial Protection Survey pointed out that although 69% of Indian households save for their old age, they deposit their money in low-return instruments. Thus, even though there is a growing awareness of the need for retirement planning, there’s very little awareness of the range of instruments available in the market for such purpose.

For the young Indian population, the accumulation phase—when they earn and save for their retired days—is of great importance and interest. They need to understand the instruments available in the market which enable them to maintain the discipline to invest for the long term. Life Insurance offers such products both in traditional and unit-linked designs. Retirement planning is always a long-term affair, and one should look at such investments from that perspective. The asset management capabilities of life insurance companies are tuned to manage long-term investments and reap better returns over a longer period of time, as compared to other investment instruments, which have a comparatively shorter term perspective. The world over, the basic nature of life insurance companies makes them an ideal investment avenue as far as retirement planning goes, while financial instruments like mutual funds can be considered for short- to medium-term investments. For instance, the unit-linked platform offered by some products gives the customer the flexibility to invest more in equity in the early accumulation phase, to gain from high returns. As retirement age comes closer, one may opt for debt funds. The dynamic allocation facility, in fact, takes care of this fund allocation need as per life stages automatically. Other products that can also be used for retirement planning offer features such as annuities guaranteed for a period ranging from five to 20 years, accident and disability benefits, including riders for “dread diseases” and so on. To keep the investments within the manageable limits to enjoy a carefree old age, the earlier you start planning, the better. In-built flexibility allows customised packages that depend on individual needs...characteristic of the flexibility that retirement demands!

So, when potatoes sell for, say, Rs 50 a kilo 30 years from now, you might leave them off your shopping list because the doctor—and not your wallet—said so!

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now