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Delayed planning? Delay retirement

Arvind Rao / 24 Jun 12 | 12:30 AM

Rising stress and less time for families are leading to quick burnouts in the corporate sector. The result: Desire to retire early. But economic uncertainties, both internationally and domestically, aren’t helping these aspirations. Double-digit inflation figures and single-digit business growth and consequently salary hikes, are not a very positive sign. Global statistics have shown that the percentage of those working after the age of 65 is increasing faster than any other age group. Reason: Largely financial fears.

Late retirement planning
There are many reasons an individual can give for not planning for his/her post-retirement life. Many are genuine ones and some are made up. For instance, these days more number of people are borrowing funds from financial institutions and servicing loans. Obviously, repaying the loan becomes a bigger necessity than setting aside funds for retirement. As a result, saving for retirement gets pushed back further. Not many try and plan both together.

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Next, the child’s primary and higher education comes first on the priority list of all families and this is where parents’ / families’ income is first allocated, leaving behind retirement planning. After this, most parents want to get done with their child’s marriage and they save for this purpose all their life and very diligently but not for their retirement. These are valid reasons but prudent planning can help manage your bigger priorities and retirement, which should also be on your priority. Some delay it thinking they have enough time on hand.

Typically, retirement savings hardly constitute 10-15 per cent of a family’s income and definitely do not meet the mammoth retirement corpus requirement to maintain a similar lifestyle post retirement as well. An individuals realises the need for planning this in the last 3-5 years of his work life. Unfortunately the time left can never be enough. Rising life expectancy and the risk of outliving it has only aggravated this problem. Most of the above factors coupled with other unforeseen factors have the potential to delay your retirement age.

However, every problem comes with a solutions. See if you can delay hanging your boots, if you haven’t been able to save up in your work life. This will help you earn and give you more time, money to save for retirement but you have to be very disciplined for the same. And it has its own advantages.

Advantages
* Plan more time to save: Retirement savings typically gets boosted in the 5-7 years prior to retirement. As before this, individuals have some commitment or the other and do not find the money to invest for post-retirement. Delaying retirement would help get another 3-4 years to increase savings. Cherry on the cake will be if children become financially independent. Every additional year added to work life makes available additional years for existing investments like provident fund, gratuity, and self-funded investments, to grow.

This, in turn, would mean less number of post-retirement years and fewer years to provide for.

* Improved social life: A job or business is not only to earn. You also get a new social circle among colleagues. And networking will help more opportunities come your way. You can make great friends at work also. A delayed retirement helps to keep up an active social life for longer.

* Health benefits: Most salaried individuals rely on employer-provided medical cover. Medical coverage beyond 60 is definitely a lot dearer, especially if the cost of the same has to be met from your own pocket. If you continue working, you will be able to enjoy the privileges of extended medical benefits and this will definitely be lot cost-effective. But, that does not mean you don’t have an separate insurance. That is important at that age.

An active life, even if with a job, helps you stay active, busy, healthy and age slowly.

* Employment benefits: Working longer would also provide perks like taking vacations, getting tax benefits. The same holds good for medical expenses, food coupons, housing and fuel bill that can be availed to save on taxes. However, seniors sometimes may find it difficult to work with a younger workforce especially if they join a new organisation after serving one for a very long time.

The key is to capitalise on the skills developed over the course of your career, share them with the youngsters and not compete directly with them.

Ways to delay retirement
* Become a mentor: Many companies are slowly taking to mentorship programmes for new recruits and younger staff. Though the youngsters may have strong technical skills and education, they often lack experience and need a mentor for guidance. It makes sense for experienced individuals to look out take up opportunities and become a mentor within their own or new organisations.

Such mentors can provide in-depth knowledge of the processes, systems of the company as against external training programmes and be great recruiters.

* Consultants: Assume the role of a consultant in the sector to one or more companies. Your vast experience would be an asset for youngsters and younger organisation(s). Consultants can help organisation(s) with contacts in the sectors for business growth.


 

The writer is a certified financial planner

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