Satyamev jayate – Rewire with Retirement Planning

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satyamev jayate

The Latest Episode of Satyamev jayate (episode 11) has raised a major issue of disowning the parents or not taking proper care of old age parents by their own children. This is becoming a very common problem these days, due to so called busy schedule, work deadlines, time constraints etc. Where parents have always been full of emotions for their children, their children are not that much concerned about their parent’s wellbeing. There’s hardly any plan written by me where one of the goals are related to Parents. They may not be financially dependent on you but yes they are emotionally attached to you.


The idea of this article is not to make children aware of their responsibilities and take steps on financial planning aspects related to their parents (which has already been done through my other article Read: Help your parents). This is to point out the importance of Retirement planning which arises out of risks associated in retired life/old age. Almost all of the points have been discussed by Mr Himanshu Rath (Agewell foundation, New Delhi) in this episode of Satyamevjayate. (Watch the full episode here). These points have also been discussed by me and hemant on Money plant – DD national (watch the video here).

 
www.satyamevjayate.in
 
The pointers below will not only help the youngsters to feel the importance of retirement planning but also to the retired people who are actually going through this phase.

1.      Longevity Risk :

This is one of the major risks associated in old age which has made the retirement planning the most important aspect. As discussed by Mr Rath which is quite right in itself that life expectancy in India has very much increased. It is a normal tendency to live up to 75-80 years and in case of females it even more. Now just imagine, you have to support yourself and your spouse for 20-25 years of life (assuming you retires at 60) and that too when you are not getting regular pay check. How much amount would be required to support such scenario? (Read: retirement or pension plan)

Over and above looking at today’s kind of working and sedentary lifestyle, do you really feel that you would be able to work till Age 58/60? Also looking at the medical facilities these days, can you believe that you will live only till 80 years of age?

2.      Dependency Risk:

This risk relates to your dependents i.e.  your immediate dependents while you are working and whom you may have to support even after retirement. Today’s culture of late marriages leads to late children, late children means their late settling in life and marriages. Your most of the surplus goes into giving them the best in the world. Many times it has been seen that children are getting married after the parents got retired, or children are still studying even after the parent’s retirement. This scenario eats out the major chunk of retirement savings. To top it all, just imagine, if your child wants to start a new venture and asks you to support him in finances.

I am sure you will help him, but not sure whether he will when you need (if at all) later in life.

3.      Health Risk:

With the improvement in the health facilities where the life expectancy is increasing , health is deteriorating. Heart attacks, accident, blood pressure, cholesterol etc. have become very common problem these days. When this happens in your earning years it will definitely put a major impact on your earning potential and if later it will make a big hole in your retirement savings pocket. Even if you are insured, you don’t know how much enough is. You need to keep on reviewing the insurance portfolio and also take into account the health problems while planning for retirement. (Read : Review your insurance portfolio)

4.      Emotional Risk:

This is very valid point and applies at both stages i.e. Post and Pre Retirement. We are very emotional creatures. We sacrifice all our happiness or desires to make our children happy. I don’t think you need any data to believe this. If this is a question of Children future we are ready to sacrifice our present. Children plans are more sought after then Pension plans. We gets ready to withdraw all our savings, even gets ready to take loan out of our Provident fund  if our child wants to study overseas or go for any other expensive higher education. I understand the emotions behind this, but is this the right way to deal with? I mean you need to have a proper planning in place for children future but this should not be at the cost of your retirement planning. Please understand that you can get education loan but no retirement loan. (read : plan for your child’s future)

Even after retirement we are so emotional towards our children/grandchildren that we are in a habit of giving so many gifts to them in cash or in kind out of the retirement kitty. This behaviour has induced some insurance companies to promote their product and sell it emotionally to you. Recall ICICI prudential child plan ad) But this is not right as you have to manage so many risks as discussed above. If at all you want to do something for your kids, do a proper estate planning, gift them through a proper WILL. Don’t make mistake to part with your savings while living. Hang on to your wealth.

Retirement years are called as golden years of life. Enjoy it to the full. Financial independence is the key. If you are financially independent then you would be least worried about the future.

Proper Retirement planning REWIRES you in those years.

JAI HIND – SATYAMEV JAYATE ……Now listen to song “Bahut yaad aate ho tum” 🙂

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He’s MBA ( Finance) gold medalist, a CERTIFIED FINANCIAL PLANNER and SEBI Registered Investment adviser. An ex banker , having a decade long experience in financial services industry he manages clients across the globe. He is a regular contributor to various leading Media and publication houses. He keeps on writing for Moneycontrol, Dainik bhaskar, Business standard etc. He also delivers training on Various personal finance topics to various corporate houses. You may get in touch with him at [email protected]

19 COMMENTS

  1. Hi Manikaran,
    Awesome job – people have to understand that gone are the days when kids were taking care of parents. Show was really “Sach ka Samna” for most of the people.

    • Very true hemant. and moreover its very depressing when you become financially dependent on your dependents when you have lived your complete life on your own terms.

  2. Hi, Gr8 job Manikaran….such blogs just add up to our financial literacy 🙂
    Perfectly agree with both of u…i have read Hemant’s post on retirement, as well as i have seen u both on Money plant. Its an eye-opener for a 30 yr old like me to plan for my retirement , as well as look after my parents retirement financial planning …

    Both my parents are still active professionally, they are financially independent- they have a good diversified portfolio- By god’s grace their health is fine too….so keeping a moderate to conservative risk appetite, will MIP’s be a good option for them?? They already have FD’s & both of them being in the highest tax bracket, i was also thinking of FMP’s ( 2-3 yr tenure) as a tax efficient option . I am aware of the illiquid nature of FMP’s… But Is it good to lock in 2-3 yr FMP as the interest rate cycle is peaking out??
    So wht shd i do?? MIP’s or FMP’s ?? Or both?? they have an horizon of 2-3 yrs.
    Someone suggested me BSL Medium term Medium term plan ( non AAA rated securities) . I havent really understood it. So Kindly advise….

    • Well, looking athe current interest rate scenario i think that open enede debt funds will do good in near future. may be better than FMPs. But this will make the returns more volatile . If your time horizon is 3 years or more and can digest volatility then i think that you should go with balanced funds like HDFC prudence. You may do STP for first 6 months and then continue it for as long as you can. For FDs they already have, i will advise to divert into FMPs to make more tax efficient portfolio. I think if they are professionally active then it may not be that difficult to give investments some more lock in.

      • Thanks for ur reply…

        Is investing in Dynamic bond fund worthwile now?? with a horizon of 2-3 yrs, can i start SIP in dynamic bond fund like SBI Dynamic ???
        My dad already has SIP’s in Hdfc Prudence. So shd it be increased, or shd he opt for any other balanced fund ??
        Any role of gold etf’s at this stage of life??

        • Yes Dymanic bond funds can be a good investment these days with 2 years time horizon. But better to go with Birla or IDFC dynamic bond fund looking at the stable and consistent performance. I have been closely watching SBI, it has started performing very recently so can’t be trusted for longer tenure. Now , as these dynamic bond funds may take exposure to GILTs also, so be prepared for some volatility. But surely you will get good tax efficient return going forward.
          There’s no need to add any other balanced fund…and question regarding Increasing SIP or Adding gold funds has to be answered looking at the complete profile.

          • i have a lumpsome amount nw. shud i go ahead with lumpsum investment or shd i go for SIP’s in Birla Dynamic fund? Does SIP in debt fund have benefits like they have in Equity fund??

          • @anna ..with a horizon of 2 years and that too in debt funds, at this moment go with lumpsum investment. Yes, sip in debt funds has its own benefits as no one can preditc which way interest rates are going to move in long term , so it has its own kind of volatility but like equity funds SIP , debt funds SIP also work on same features and needs time to perform

  3. can we ourself invest in these dynamic bonds? Or we need to go through trading companies? In later case which company will be best to go with?

    • Abhishek, these are normal mutual funds so can be purchased directly through AMCs or online. You may go with the funds suggested to anna for the same tim frame.

  4. Dear Mr Singal and his other team members,
    Let’s get connected and remain in touch. We all are trying to address the same audience. Together we can definitely compliment our mutual efforts.

    Best wishes,
    Himanshu Rath
    +91 9810030979

  5. Very well written !!!
    I am a 65 yr old doctor, still actively earning…may be i will continue practice fr 2 more yrs…I have invested over last 30 yrs across all asset classes…now i have a lumpsome to invest.i am looking forward to tax efficient instruments ( i fall in 30% slab) with a 2-3 yr horizon. Do u recommend FMP or MIP (mutual fund) or both?? If i invest in MIP, shd i do a lumpsome investment + SIP’s or only SIP’s??

    I intend to lock in my money at the current interest rates in a 2 yr & a 3 yr FMP. I have shortlisted Birla Sun Life FTP Series FG ( 728 days) & ICICI Pru FMP Series 63-3Y Plan M ( 1098 days). Is my choice correct?? kindly advise…

    • Amit, yes FMP and MIP are good tax efficient instruments for a person comes under highest tax bracket. I would suggest you should go with Lumpsum investment with 2-3 years time horizon.
      I can’t comment on Birla/ICICI FMP that you have asked for…do ask for the portfolio details before investing. It should be of AAA rated securities.

      • Thanks…

        Any advantage of lumpsome over SIP’s as far as MIP’s are concerned??

        Since interest rates are peaking out , u suggest to go for a lumpsome investment in MIP as a better option….Is this the reason??

        • Yes…this is the main reason. SIP is meant for llong term averaging. There’s no point in averaging out on MIP like funds where the scenario is looking obvious and time horizon of investment is just 2 years.

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