As per demographic statistics, India has more than 50 percent of its population below 25 years and 65 percent of the population is below 35 years. With the decision of the government of India to stop defined benefit pensions to all its employees who joined after 1 January 2004, planning for a retirement corpus has attained paramount importance. For private sector employees, retirement planning is all the more important. This helps them be financially independent post-retirement.

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Working for a living is a necessity for most of us. But there is a limit to human endurance and one must retire sometime in his life. In India, while most view 60 as normal retirement age, many retire before, sometimes with contributory causes such as job loss, disability, etc.

While in some professions, working well into 70s is the norm, some professions like sports and modelling may see early retirements. Each situation will have different financial implications and hence retirement planning needs to be dealt with accordingly. It is important to create a sufficient capital to maintain a decent living standard beyond retirement.

Factors which impact your retirement corpus:

Inflation: Inflation reduces the value of money year on year and eats away into your purchasing power. In 1998, a plate of idli used to cost Rs 5 while the same portion now costs Rs 25.

Falling rates on fixed returns: Earlier, it was possible to maintain a particular income level by selecting fixed income instruments for investments as these were yielding high returns. Even a passive investment strategy helped in getting good returns for earlier generation. However, in the present falling interest rate scenario, the present generation must manage its investments more proactively to sustain income levels, which helps in leading a better retirement life.

Increasing life span: With the availability of better medical technology, life expectancy is increasing. Sufficient corpus is required to maintain the same standard of living post retirement.

Shift from joint family system towards nuclear family: In India, the joint family system was widely prevalent, which meant people in their old age could rely on their extended family to take care of their needs. Now the generation is shifting towards nuclear family due to factors like better employment opportunities at different locations. This shifts the onus on the individual to ensure proper financial planning.

Increasing medical costs: Medical costs is a major component of expense post retirement. The cost on this front is rising year after year and this adds up to quite a sum. To handle such situations, one has to earmark sufficient amount towards medical costs.

Every individual should start planning their retirement as early as possible for smoother accumulation of corpus. However, it is always better to approach a financial planner and strategise your investments as per your requirement.

Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

Source: Moneycontrol.com