City dwellers today are saving and investing less, allocating more than half their income to current expenses, finds a survey commissioned by PGIM India Mutual Fund.
Do Indians have a retirement plan in place?
Worry about the future, however, is increasing
People are worried about the cost of living, healthcare issues and the lack of family support in future.
Retirement comes way down on the list of financial priorities
Children’s needs and security of the family take precedence over all else.
1. Providing for child’s future, education and marriage
2. Financial security of children
3. Financial security of spouse
4. Providing for medical emergencies
5. Being physically and mentally fit
6. Leading a life without stress or burden
7. Improving standard of living
8. Planning for life after retirement
26% of respondents dread the idea of being dependent on children or families in old age
Concerns around post-retirement finances
Those without alternative source of income feel vulnerable
Retirement planning is linked to su rplus income, not age
Planning increases with rise in income.
% OF PEOPLE WITH RETIREMENT PLANS ACROSS INCOME BRACKETS
Indians invest primarily in life insurance and fixed deposits for their retirement
This underlines the essential conservatism of most retirement planning, and the preference for investments that minimise risk.
Lack of awareness hampering planning
Many feel retirement is a vague concept. Even if they wanted to plan, they don’t know where to start, or how much to save.
The silver lining
Most Indians are keen to have a knowledgeable financial adviser
Retirement planners tend to make detailed plans
Those who plan, tend to start early
- The planners start at an average at the age of 33
- Those who don’t, expect to start at the age of 51
Indians confident of plans but confidence may be misplaced
Account for personal events, but neglect external events.
- 98% account for expected personal events like marriage, expenses, vacations, EMIs etc.
- 54% say plans cover unexpected personal events like hospitalisation, sudden disability, critical illness etc.
- 33% prepare for events like a slowdown, inflation, market volatility or instability in regulations or rates.
Many unaware about how much they need
Most believe retirement corpus should be about 7-9 times their annual income.
- On average, urban Indians aim to gather a corpus of about Rs 50 lakh.
- Only 1 in 5 Indians consider inflation while planning for retirement.
Employers have a vital role to play
- 88% say they would be somewhat motivated to plan for retirement if they got help and guidance in retirement planning from their employers, with 56% saying it would strongly motivate them to begin planning.
Source: PGIM India Mutual Fund Retirement Readiness Survey 2020. The survey conducted by Nielsen covered 3,103 respondents across 15 cities.