The Buyt Desk
Indians do not have a habit of planning retirement, instead, depend on their children. Let us understand how you can achieve financial independence.
India is celebrating 75 years of independence on August 15, 2022. As we commemorate this day, we are at a decisive moment to look into income security for the ageing population and their financial security. Also to look into financial freedom of the working population and ensuring they plan their retirement with financial independence. As per researchers, less than one-fourth working population is into savings, investments and planning for their retirement.
Indian working population and retired population
India’s health facilities and sanitation has improved so much in these 75 years that the life expectancy of its citizens has gone up from 35 years to 70 years. In the next 30 years, India is likely to add 183 million working age group citizens to its population i.e., between 15-64 years of age. The demographic dividend is going to occur with this addition of a vibrant young population to India’s workforce. This is a reason to celebrate as there is a high potential to become number one in the world. And at the same time by 2050, the retired population is predicted to be over 227 million. While our current retired population is about 60 million.
In India by 2050 60 years and above population will amount to nearly 20% of the total Indian population. The retirement age has not changed while the demographics are changing. This is non-synchronous and will result in a high number of post-retirement years. A big chunk of the population should survive on alternate sources of income as the retirement age would still be 60. The alternate income for the retired population is usually pension, retirement savings and investments. This financial cushion will provide them with financial freedom and help them lead their retired life with dignity.
What is the source of funds in retirement?
In India, more than half of the population depends on their children for post-retirement care. They are completely dependent on their children for finances. And most of them do not know or have not figured out how they will generate funds after retirement. This is a group of people who just think of the present and are least bothered about the future. Nearly 30% of Indians depend on their business and bank savings for post-retirement funding. Nearly 10% of the retired population depends on the provident fund, pension and wealth funds. And less than 5 % depending on real estate, movable assets and financial assets for post-retirement funds.
RBI studies also say that from the survey they conducted in India only 23% of respondents were either saving or planning to save for retirement, 33% are not planning retirement funds and a shocking 44% of them are not expecting to retire at all. This study shows that the majority of the Indian crowd is neither prepared for retirement nor planning post-retirement finances. This will definitely affect the fiscal health of the nation.
How much is Physical asset dominance in India?
It is an age-old practice in India to buy gold and land so that it can be passed on to the next generations. It is also considered the best way to accumulate wealth. Every Indian household has gold and land as physical assets. And not many are in financial assets, savings for retirement is never thought of as they are confident that their kids will look after them. The Reserve Bank of India (RBI) studies say that the average Indian household holds 77% of its total assets in real estate, nearly 11% in gold (usually ornaments), another 7% in other durable goods and a mere 5% in the form of financial assets. This makes it very difficult for families during times of crisis as they do not have a contingency fund to fall back upon. During family crises and emergency expenses, most of them have no other choice other than taking out funds meant for their pension or savings reserved for retirement.
Are the elderly in India seeking employment?
There are many individuals and families who do not have a regular pension or retirement corpus. These are the ones who will be in a long-term debt trap with high-interest rates and unsecured loans. This is driving many elderly Indian populations to seek employment. There is no retirement concept for many Indians. They work until their body permits them or until they are bedridden as they do not have any pension or retirement corpus. A United Nations Population Fund report says that nearly 71% of the 60+ aged population in India work to make ends meet and to clear debts and not by choice.
Summing up
In 1947, India gaining Independence was not an overnight affair. It was a long battle where many shed blood and many were martyred. Only the sweat and sacrifices of countless determined, devoted, brave and dedicated freedom fighters brought us independence. Similarly, achieving financial Independence is not a quick and easy process. Financial freedom can be achieved with a continuous process of financial awareness, planning, starting young, taking cautious financial decisions, saving & investing regularly, having an exclusive retirement corpus and being patient during the entire period.
This Independence Day let’s pledge to achieve financial freedom and also help others to achieve the same for a better and healthier life.
