Excuse my naivete, did you really think that a ₹1-crore kitty will see you through retirement? That’s your innocence (or perhaps it is ignorance) but, no, your assumption is so, so wrong. You have not accounted for inflation — advancing costs that will no doubt eat into your savings as silently as a deadly ailment. A crore will not remain a crore in an environment marked by rising prices, regular withdrawals and sudden emergencies. Welcome to the harshest of all realities that bug ordinary income-earners — our savings are rarely enough, we are far more likely to outlive our reserves than ever before.

A recent study — it is grandly titled “India’s Retirement Reality: IRIS 5.0” — has exposed the nation’s soft underbelly. Indians are by and large financially under-prepared for life after work. The study, an attempt by Axis Max Life, has drawn a raw portrait. A higher (but this is a marginal increase over four years, from 44 to 48) retirement index underlines the weakness. Our “cost of ageing” is rising faster than incomes or savings. And, thus, the ₹1 crore myth persists.

A rather high 70 per cent of urban Indians still believe that such a kitty will be enough for a comfortable retirement. In today’s world — remember, medical inflation is at about 12-14 per cent — we have higher longevity. And the fact that lifestyles are getting costlier cannot be hidden any more. So a ₹1-crore pool of assets will barely cover a decade of expenses for an average middle-class householder. It is not surprising that more than 60 per cent admit their savings will not last even 10 years (after retirement).

That is as far as the survey goes, and I will draw a line here. What troubles me is that many savers understand the issue early on in life. Most ordinary people realise it by their mid-40’s. However, almost all of us are afflicted by that singular disease — late action.

Early start, early action

Experience tells me that not a lot of Indians (yes, I am particularly referring to middle-class urban folks here) feel that retirement planning must start with their first paycheque. Those who think otherwise often fail to execute a concrete plan. A large number of us do little to build the corpus they will need in 10, 15 or 20 years.

The other major issue relates to the general failure to continue. In other words, the average Indian knows more about financial products than before. They do begin with a lot of gusto, but lose track of it somewhere on the way. Such failure to continue certainly proves costly. The lesson to learn is simple — yes, we should start early, and, yes, we should keep doing it for a sufficiently long period of time.

I can connect all this to yet another problem — the absence of “proper” financial guidance and intermediation. “Proper” here is a broadbased term that covers licensed, registered and professionally qualified advisers. Let us not forget that our history is replete with instances involving unregulated intermediaries. In this current context too, this is a major issue. “Friends, family and fools” cannot serve as our financial guides for long. One needs professional service providers.

Retirement products

It is important to choose our retirement products well. Here is a list of issues to consider, the average retiree needs to ask these questions.

This question is one of the toughest googlies in this day and age. Rising medical expenses force our hands to commit higher health insurance premiums. But what are the key questions to ask in this context? Here is a list:

The retirement survey mentioned earlier in this column makes interesting reading. Indeed, it does not merely dwell on the financial gap typically created by superannuation. It shows us a lot more — some of its findings are way beyond mere pecuniary. Excessive financial dependence on family members, for instance, is often a problem in India. If we are not retired yet, and are focused sufficiently on our retirement plan, let us remember this at all times.

Old-age can unleash unique problems. It can well turn costlier, longer and, for the really unfortunate, lonelier. Readiness is all.

Nilanjan Dey is partner at Wishlist Capital. (ARN-84929)