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Asset Allocation

Retirement Woes

One of the key reasons for savings is to ensure that once one retires from their job, they have enough resources to help them lead a comfortable life for the next XX years they may survive. The last thing most people want is to become destitute’s in their old age and dependent on either their children or worse relations.

If you were to read the key problems facing Americans, most of them aren’t ready financially for retirement and even those who thought they were were rudely awakened when the global financial crisis hit the town in 2008. In India, savings for Retirement is generally made via Provident Fund if you are employed. State / Central government employees contribute part of their income to ensure that after they retire, they can get a pension (which is adjusted for inflation) till the end of their lives.

While under savings is a horror story many hear and for sure don’t want to be on the same boat, over savings (which like anything else in life comes at a cost) is meaningless especially if comes at the cost of sacrificing things you may have loved to do during your younger years but got too daunted since that would have eroded a substantial part of the savings.

In last few years, I have lost two family members and the story of their lives is so much similar and yet so different. While both faced hurdles at a younger age, one was able to enjoy life much better than the other. I was reminded of them when I was having a conversation with a good friend of mine who wanted to do certain things given that as one ages he knows that he will not be able to do the same as he gets older, yet the lack of understanding of what he really requires to lead a comfortable life post his working career means that he would rather save as much as he can (and given what I know, he already has exceeded what would be required at the current stage of his career).

Financial Planning these days is all about Excel and Calculators to show  that if you spend X now, 10, 15 years later you will need (m * n), but does one really have a clue as to how the world will shape out 10 / 20 / 30 years into the future?

10 years ago, I did not dream of spending as much as I do on Telecommunication as I do now while on the other hand, what I thought would be really expensive hasn’t really lived up to the fear. 10 years from now, do we really know what our major spends will be given the pace at which technology is changing our lives?

Former prime minister Indira Gandhi coined the term “roti, kapda aur makaan” as an election slogan and truth be told that its the basic requirements I think most of the readers here would already possess. Census 2011 said that 86.6% of the population owned their houses and yet the Real Estate boom has meant that rather than enjoying what we possess, we try to gather more in the hope of even more gains.

Food Inflation has been pretty high in recent times but given that is a commodity at best, the same cannot go on forever since consolidation of land, better quality seeds, use of technology will make food cheaper at best or roundabouts here.

While Textiles has turned out cheap, the one factor most didn’t account for and is a major dent for families is Education which has become way expensive over time. Then again, not sure if anyone thought people would ponk up the kind of money they do now.

But with Massive open online course (MOOC) catching up, do you really think that 20 years from now, Children will have to spend a Crore or more to get into a college in America?

Savings is important but so is leading a life as carefree as possible. Right now I am in the middle of reading Shoe Dog by Phil Knight and while its a case of Survivor / Selection bias (he wrote the book because he survived the adventure and we read because Nike is after all one of the biggest brands out there), I still wonder how many families allow their wards to take risks he took early in his career.

Not all risks pay off, but the experience stays and helps one feel of a life led according to ones wishes and dreams. So, how many dreams are you killing for a goal about which you don’t have a clue let alone know the path? Food for Thought?


3 Responses to “Retirement Woes”

  1. brilliant! truly brilliant piece

    “only thing more deadlier than an atom bomb is a spreadsheet in the hands of a financial planner” – einstein’s ghost

    ” ants spend entire summer toiling and hoarding food for winter. 90% of these ants die before the same winter comes”

    Posted by ajayrajaram | 4th January 2017, 8:18 am
  2. If one sees his responsibility as extending towards the next generation, then this equation would change. For my progeny to go ahead and take risks, there is a requirement of a safety net. And that safety net would come from these savings.
    In such a case, the requirement of savings would go up significantly.

    Does one want to enjoy today to the maximum or put forth a legacy that would last a generation?

    Posted by Omkar | 4th January 2017, 3:47 pm

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