The only way we have to answer that question is by countering with another one -- why shouldn't you plan for retirement? We contemplated writing an article on '5 reasons individuals need not plan for retirement' but failed to come up with even one good reason.
Of course, we did not consider reasons like 'lottery winnings' or 'millionaire father's legacy'. On the flipside, there are several important reasons that we came up with on why individuals should definitely plan for retirement.
If you want even a vague idea on why retirement planning is important, try speaking to your father or a senior citizen from your family/acquaintances and ask him about his 'financial' regrets. Our bet is that the first one will be -- 'I wish I had saved more.'
We are also willing to bet that the more people you ask, the more you will hear this. Our advice -- let this not become a regret for you as well.
Apart from being the sage advice of the elderly, there are some important reasons to plan for retirement. The most important one is inflation, a term most of us are pretty familiar with, but may not have fully appreciated the 'harm' it can do to your money over the long term.
Ever wondered why the toothpaste that cost just Rs 8 about 15 years ago, costs more than Rs 50 today or why petrol and LPG cylinder prices have risen by more than 6 times over this period. The reason for such a sharp rise in the prices of these and thousands of other products can be summed up in one word -- inflation.
Put simply, inflation diminishes the purchasing power of money; so over time you get less for the same amount of money or pay more for the same goods. While we grumble about rising prices of fruits, vegetables, the LPG cylinder and property among other things, at least we are in a position to afford a lot of them while we are able and earning.
Will we still be able to pay for them, when we have retired and stopped earning? Anyone who believes he won't have a problem paying for the daily items of consumption should consider this -- our research says that given the current rate of inflation, by 2017, Colgate toothpaste will cost Rs 104 (costs about Rs 47 today), a litre of petrol will cost Rs 259 (Rs 48) and the humble Hamam soap will not appear humble at Rs 52 (Rs 18).
Inflation leads to a rise in prices of goods and services. From a retirement perspective, rising cost of medical services is significant.
At that age, people need more medical attention and as years go by, it becomes a challenge to provide for the rising medical costs. And it's not just your expenses, but that of your spouse as well.
As life expectancy increases rising medical costs seem more daunting, especially since you will not have a regular income at that stage. This may seem scary now but if you plan for it, it takes away a lot of uncertainty.
Today, you find a lot of families where children continue to live with their parents as joint families even after marriage. However, if the existing trend towards 'moving out' is any indication, then older people may not really have their children to fall back upon during emergencies. So financial independence becomes even more critical.
According to a statistic from a leading life insurance company, only a little over 10% of India's working population has any form of social security. That means a lot of people have not planned for their retirement at all, which is very unfortunate.
Retirement planning is not just important, but when you get down to it, it's a lot simpler than you had thought it to be. We believe that a little bit of discipline and patience can go a long way in turning 'retire in peace' from a slogan into reality.
