Almost a decade ago, I remember being a trifle surprised to receive the bio-data of a 65-year-old gentleman in response to a job vacancy that my company had advertised for. His CV was an impressive one and he had held a fairly responsible position with an MNC at the time of his retirement at the age of 58. He visited our office to meet me soon thereafter and what he told me still resounds in my ears.
At retirement, he felt he was adequately well equipped to fend for his wife and himself, having invested a fair amount of his savings in Fixed Deposits and Insurance, typical of an older Indian investor back then.
He had retired quite happy, having held a prominent post, holidayed around the world with his wife and having facilitated an overseas posting for his only son.
Within a couple of years post his retirement, he began feeling the pinch of ‘Real’ Inflation viz the cost of his purchases escalating at a far more rapid rate than his return on investments. Interest rate cuts had led to lowering of FD rates and the periodic inflows from his endowment insurance policies which had seemed quite adequate then, now seemed woefully inadequate.
Having tried cost control measures to stem outflows, he realized by the fifth year of retirement that he was fighting a losing battle. Being a self-respecting man, he resisted the temptation of seeking financial support from his son and, instead, decided to start working again to realign cash flows.
This is by no means an isolated incident and now, more than ever, with interest rates at its lowest and most retirement realizations brought into the tax net, I fear that there must be many in India going through the same experience.
It is worth noting that over the last six decades, the life expectancy of Indians has risen to around to 69 years from just 41 years, as per World Bank data tabled in 2017. Unless this trend reverses, chances are that post the ongoing pandemic, Indians may have an even longer life expectancy.
The insurance industry in India was off the blocks with their pension plans and the mutual fund industry also discerned this trend. So, there is now no dearth of retirement fund schemes on offer from various Asset Management Companies (AMCs). Besides these, there is, of course, the Government-backed National Pension Scheme (NPS). Which of these you should choose is a question best left to experts.
Clearly, post 60 years of age is an extremely tricky time that every investor who meets and exceeds the Indian life expectancy will have to tackle. Those who plan for it early are the ones who are less likely to realize the sinister intent of this old Chinese curse: ‘May you Outlive your Money’.
Ashok Kumar
Head of LKW-India. He can be reached at ceolotus@hotmail.com