Are you prepared?
If you somehow knew your exact date of death, planning for retirement would be a cinch. Unfortunately, you have no idea, and as far as prevailing facts and proven trends are concerned, chances are you will stay alive for way longer than previous generations. This, despite being “good news,” opens up a whole new pandora’s box of challenges. Let’s dive in.
“Am I lucky enough to live that long?” Find out for yourself:
Improved healthcare, better living standards, medical science breakthroughs - all have made it possible for humans to conquer ageing to a large extent. Numerous studies prove it conclusively that life expectancy is witnessing an increase world over and people are staying healthier for longer.
- This WHO Report (World Health Organisation) shows that newborns in 29 high-income countries have an average life expectancy of 80 years or more, and the rate of improvement in life spans is only going to accelerate.
- This CNN Report reiterates the same sentiment.
- “People today are less likely than their parents to die from certain conditions, but there are more people of older ages throughout the world,” says IHME (Institute of Health Metrics and Evaluation) Director Dr. Christopher Murray in this report.
“Have humans found a Fountain of Youth?” Nope. But it’s something quite similar!
Advancements in Biotechnology like CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) (How CRISPR Can Stop Us from Aging) and anti-aging crusaders like Aubrey de Grey ("How We Can Finally Win the Fight Against Aging" TED Talk) are making us head towards a Brave New World.
“What does it all mean for my retirement planning?” Well, brace yourself! It has profound implications!
Longevity is a big issue which will change the future and which we have to adapt to. The fact that we are living longer is a really big change that the society, individuals and companies really haven’t thought through. We have all been living longer on an average. We are being given a lot more time. Imagine you’re going to live for a 100 years. What a gift it could be! What all you could do with all those years! But there are profound implications. Research suggests that people who have happy and fulfilling long lives are the ones who enjoy certain financial security in years of no stable salary inflow. In absence of that financial security and a lack of savings that gift of 100 years can very well be a curse.
This New York Times Study says that a human life expectancy to age 115 was not unrealistic! This means a lot more time in retirement.
Using the traditional retirement age of 60 as an example, if you were to live to 115, you would be retired for 55 years versus having worked for 38 years (assuming you started your first job at age 22 after graduating from college). This would certainly put enormous stress on your retirement nest egg and would make it impossibly difficult to figure out how you will manage your financial independence after retirement.
Wait, it gets worse!
Besides longevity, other things that are set to make your retirement planning perilous include inadequate pension funds, absence of a social security program, rising inflation, and shrinking family safety net. “The traditional family net is shrinking. Children may not take care of their parents in future”, says Jiju Vidyadharan, Senior Director, Funds and Fixed Income Research, CRISIL.
Here is a Self Audit Tool for you to check how well prepared you are for your retirement.
“Should I panic, or is there some solution?” Yes, there is! Just SIP some coffee and read on!
Well, you have to agree that a logical and systematic approach to solve the problems of life goes a long way in improving any situation, no matter how murky it is. This brings us to a natural question - What’s the “systematic approach” equivalent in the context of investments?
Systematic Investment Plan
SIP stands for Systematic Investment Plan. It is a Mutual Fund industry tool that encourages regular and disciplined investing without causing disruptions to your monthly budget. Here are a few plus points of doing an SIP:
- Convenience - SIP is a convenient method that can help create wealth. Using this tool, you can invest as little as Rs. 500 on a monthly or quarterly basis. It does not disrupt your household budget.
- Flexibility - You also have the flexibility of choosing your investment amount. The only rule - the investment amount should be in multiples of 500, i.e. when investing, you can invest Rs. 500, Rs. 1000, Rs. 1500, Rs. 2000 and so on. This style of investing turns dreamers into disciplined investors.
- The Power of Compounding - The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.
- Rupee Cost Averaging - SIP uses Rupee Cost Averaging. Here, the number of units acquired per month varies based on market fluctuations. So, if the market is down you get more units and if the market is up you get less. This minimises the effect of market volatility on your investments.
To summarise, let us all understand one thing — we will all get old, and though our lives will be longer and healthier than any previous generation, the really long retirement time period will pose great many challenges. Good thing is, just like with any other dilemma in life, a systematic and disciplined approach (SIP) is available in the investment landscape that can help you sail smoothly through your retirement years.
Once you have a list of your goals and a date by when you want to achieve them, you have to ask yourself - are you on track to achieve each of them?
Yes! Maybe? No!
If your answer was ‘Yes’. Congratulations!
If your answer was ‘Maybe’ or ‘No’, do not worry, you can get back on track using our SIP calculators here