In our previous blog based on our primary research conducted on more than 2000 working professionals across age demographics and different geographic locations of India, we had covered how 90% working professionals in India would not be able to meet their financial goals. Continuing our findings from the research report, we cover Retirement Planning as a financial goal and how our working professionals fare on this goal.
For ease of understanding we divide this report into three groups of respondents i.e., Entry Level Professionals who come with 1-5 years of experience, Mid Level Professionals, who form the group with 6-10 years of experience and finally the Senior Level professionals who belong to the 10+ years of experience category. It is important to note that professionals in each of these categories have specific financial behavior depending on which category they belong to. Also we have not taken into contributions made into PF, PPF, ELSS, etc. in this research.
Let us see how each of these groups fared in planning for their Retirement
Entry Level Professionals (1-5 years of experience)
Professionals in this group fared the worst when it comes to Retirement as a financial goal. Only 9% professionals had initiated investments to meet their retirement goal. But a majority, 91% of the professionals in this group had not made any investment towards retiring with the right amount of corpus. The average age of professionals in this age group was 23-28 years. Not surprisingly, retirement was not on the radar of their financial goals. Interestingly, we have 9% professionals in this category who had already initiated retirement planning. This also shows that there is a trend among a few of this group (9%) of professionals to think about a long-term goal as retirement even at an early stage of their life. Of course, more professionals need to be made aware of starting early for this very important financial goal.
Mid Level Professionals (6-10 years of experience)
Senior Level Professionals (6-10 years of experience)
Most professionals generally relate financial well being to either their income or the accumulated assets. However, planning for the future financial needs is often ignored. The financial life cycle of a salaried professional follows a specific pattern. At a young age, the salaried professionals rely on loans and other forms of debt to fulfill their dreams of buying a car, home etc. During the peak earnings phase they pay off their debts and start saving towards retirement. Once retired, they draw the money from their savings to take care of their everyday expenses.
Based on the current personal finance habits of the professionals, 90 % cannot afford to retire at the age of 60. The probability of extending the retirement age is higher for such professionals owing to lack of enough retirement corpuses. Having the right amount of corpus at the time of retirement is very important as this is the age when an individual faces majority of illnesses. One other important factor to consider is the medical inflation which is 30% currently. Unless these critical factors are taken into while planning a retirement goal, there is a possibility that the individual would be forced to work even after attaining the age of retirement. There is a need for professionals across all three categories to actively start planning for their retirement at the earliest and not wait for their income levels to increase. Only then the power of compounding would be able to ensure adequate funds at the time of retirement.
Written By Arthayantra