Transcript of Do You Have Enough Saved to Retire in India? | Ft. Upasana Koul

Do we know enough about people who have retired? We actually do not know anything. Around 74% of people straight away said that we want to spend time with family. Another part of it which is slightly disturbing is that financial aspect. The most important part of retirement. When we asked people how long did it take them to deplete the entire savings of retirement, the answer is 15 years. So imagine you're a 60 year old. You just retired. By 75 you have no money. And that's quite scary. Opasa Kal is the co-founder and the director of Elevate, a resource-driven consulting firm in financial services. She has shaped strategy for top firms like Nepon Life Asset Management. Today she joins us to talk about how India views retirement in the context of a 100redyear lifespan. Let's talk about that living till 100. As a thumb rule, people need to actually start planning for finances. Absolutely. The average life expectancy in India is increasing. Plus also there's a 73% of the respondents fear financial instability and only 17% start planning early. What is causing this delay in planning and saving for your retirement? So um so let's dive straight in. You've done some very interesting research and the topic of the report is how India thinks about retirement. what prompted this uh research and tell us what the findings are. Um you're right, we always start with why uh why are we even doing this? So um Elevate as a research firm, our job is to find data insights for clients. And uh when House of Alpha team approached us to get some insights on retirement, uh we just asked ourselves a question, do we know enough about people who have retired? The answer was no. we actually do not know anything. Uh so we just took a step back and said that let's find out what people who are about to retire or have retired u what are their aspirations what are the desires u and then comes the entire financial aspect of the entire story uh which is probably u as we might think uh the most important part of retirement um and that was the genesis that's how we decided that we need to go out there talk to people who are still contemplating that whether they should retire, they should wait for retirement, uh do they have enough money for retirement and these are the questions that prompted us to do the research. Uh very interesting insights. Um you know I can probably share just one or two interesting ones with you. Uh the first one was that for Indians uh the biggest aspect of what they want to do after retirement is spend time with family. Okay. Uh it comes to us intuitively. Uh globally that might not be the case. Globally uh the aspiration is very different. Uh but for Indians it's precisely to deal with u how do they spend more time with family. Uh that's also indicative of the fact that we've spent enough time working. So we keep working day and night. One of the most hardest people on the planet. And once we reach retirement uh we just want to just lay back and spend time with the family. Uh so around 74% of people straight away said that we want to spend time with family. Uh another part of it which is slightly disturbing is that a lot of people around 25% um are scared about retirement. Yeah. Uh especially the fact that they would be lonely. uh and we we'll you know dwell deeper into it in the further conversations. Uh but that just took us back that despite strong family values uh a significant percent which is 30% still feel that uh retirement could lead to loneliness uh for some even depression of being away from the aspirations that they had. Uh that's another part. Uh another interesting point is the 15-year cliff. That's what we calling it. Okay. Um when we ask people how long did it take them to deplete the entire savings of retirement, uh surprisingly the answer is 15 years. Okay. So imagine you're a 60 year old, you just retired. By 75 you have no money and that's that's quite scary, right? So we found it's very interesting to understand that it's just a 15-year cliff for somebody who's retiring or has already retired. Uh for India it's quite scary because the number of retired people are increasing day by day. Uh which means that if we have to hit our targets of getting to a 10 trillion economy uh we need to take care of the people who are actually at this 15-year cliff. So these are some of the you know insights you'll find in the report which also enlightened us. I want to touch upon all of them because they're all so very interesting. But we were just chatting a short while ago and you're saying now that at a time when yes people are talking about fear of loneliness, depleted savings. There is also that other factor where the typical retirement age is now not 60. Can you tell us more about that? True. Uh so uh there are two types of people. uh the ones who are already in government services, they know their retirement age is uh fixed, you know, uh there's no debate about it. Uh but as India has enjoyed a demographic dividend for a while, uh we have a young economy, right? Uh the startup culture is growing. U the perspectives of the younger generation are changing very frequently. uh which means that the ones who are now in that 30 35 year bracket uh have enough money to uh spend and splurge uh they do have this consideration that we want to retire early. What is early? So according to us early for pre-retirees is as early as 45 years. Wow. Uh so people want to just hang their boots and say that now retirement starts for me. Uh but what's interesting here is what retirement means to these people. For these people, retirement means the second phase of life. Yes. So it's actually not retirement. It's probably retirement or doing something new with their life. Okay. Um so that's very interesting because of the entire startup culture. Okay. Now people are considering that my retirement means that I'll start the second phase of life for myself. whatever I've earned, I'll spend that to build another venture or do something else with my life. Okay. So, do something maybe that satisfies me more or that's my passion. Absolutely. Very interesting. Um, and now let's talk about that cliff because it is very detrimental and you know across reports as well that you read financial insecurity seems to be one of the biggest pain points. Why do you think that's so? So frankly think of it like uh you know there's no simpler answer to this frankly uh but based on our interactions what we realized is that you can equate it to you know maybe a voyage you're taking in a boat. U let's just imagine you're sitting in a boat going on a long voyage you know you have maybe 10 years of journey ahead of you. You've carried everything with you. You have your supplies you have your um rice or whatever you want. You have money. you have um emergency uh you know things with you, duct tape, whatever, what not. You know, you're ready, right? You you're sitting in the boat on the voyage. When you go ahead, you in your mind, you're prepared that you know, nothing can uh you know, destroy my perfect voyage image. But as you move ahead, you realize that maybe there's a hole in the boat or there's water seeping in. Slowly, steadily, you think that I have duct tape, I'll manage it, right? But in some point of time the hole starts peeping in again and water seeps in and that's when you realize that you know something is wrong. have not planned really well right which is what happens in retirement when you're 30 35 even 40 you think that I've saved enough um I'm earning well u I have my family to take care of myself but as you near the retirement age you realize that there are unforeseen factors maybe inflation which you've not accounted for in your financial plan uh maybe this is some dependent because when we grow older our parents grow older right so they suddenly need a lot of medical expenses. So you need to have a bucket for emergencies which maybe your duct tape is not enough to handle and that's what you realize as close you get to the retirement age which is what's scary. Absolutely. So what would be the steps to make sure that when you get on that boat so that you are smooth sailing as a voyage um that you're actually saving enough. what should be the thumb rule or what should be the factors that people actually take into consideration. So things that you need to take care of. Do you have an emergency fund? Uh do you have something allotted to every goal in your life? So as you grow older, you know that um medical expenses would increase. Uh your parents could be dependent. Your children would need probably for two colleges, two kitties to you know take care of. So the entire structure of your financial plan the moment you build it for 100 years the perspective changes then you can step back when you're in 30s realize that if I live till 100 I need these five kitties plus emergency to be taken care of and that's how you structure your financial plan and you know I can honestly say that we're all educated we all know what to do uh and in our study also around 70% people said that they should have started retirement at 30. So everybody has regrets, right? Uh we asked should start planning for retirement. Should have started planning, right? Uh and we also asked them uh that you know do you regret not having planning planned earlier, right? And we got some interesting insights. So as people you know went ahead in life so somebody who has planned just 5 years ago somebody both have regrets right even the 20 year one who's planned earlier in the life still thinks that they should have planned even earlier wow right which is where reality hits you and the closer you get to the you know later stages of uh retirement the regret bubble started getting bigger okay so this is why you need specialists to ensure that they tell you that what's going to happen for the next 100 years. Uh what is in your control and what could be the kitty that you need for an emergency which you've not foreseen at all. Okay. And that's what specialists can do maybe nobody else. Now let's talk about that living till 100 because with the kind of advancements that we're making in medicine, the kind of advancements we're seeing in science, the fact that now we are seeing the life expectancy age as well also increasing in humans. Um you are saying that now as a thumb rule people need to actually start planning for finances assuming that they will live up until 100. So that is a thumb rule. Absolutely. Um so the average life expectancy in India is increasing. Uh plus also there's a there's another report by United Nations uh which talks about the fact that currently India has around 10% of people uh in terms of population who aged about 60 years of uh age. uh this number is supposed to go to 20%, which is two times of what it is right now by 2050 which means that by 2050 India would have roughly around uh 350 million people who are above 60 right which means that if your target as a nation is to become a 10 trillion economy by 2030 you need to ensure that these people above 60 are contributing to the economy or even Even if they're not contributing actively, they still have taken care of their expenses and they're well taken care of financially. Imagine the the magnanimity of the issue if you realize that you know even 5% of these 350 million people by 2050 do not have a financial cushion for themselves. That's exactly which is going to put a pressure backwards towards the economy which means that we need to actively start doing something to ensure that all these people are one financially secure and are being actively uh taken care of and they have an active leisure policy as well uh so that they contribute to what we're doing. Now the report findings suggest that 73% of the respondents fear financial instability and only 17% start planning early. I want to understand what is causing this delay in planning and saving for your retirement. Frankly, it's all about procrastination. Uh we've tried to interview a lot of people wherein uh we wanted to understand what the reason behind all of this is. Uh the first reason and I go back to what the insights we were talking about earlier the family values a lot of people think that they have a family ecosystem to take care of themselves and hence they might not even need retirement planning right uh that's the first reason. Uh the second reason is that when you're younger um and that's what we realized with pre-retirees their aspirations are very you know different the gung-ho right so when you're in 35 40 uh age bracket your aspirations are very different so in terms of the data uh two times more people who are pre-retirees think that they want to start a new venture after retirement which means that they think I'll have continuous income coming in even after I retire. Whereas when you talk to postretirees, I think they're too tired working or have spent enough time working uh the aspiration to start something new is slightly lower. So there we found insights like their participation towards yoga or CSR activities uh that becomes their aspiration, right? Um and since this priority changes later in life, which means that you still think you have time to plan for retirement. until the time you're not post that age um you don't think you need it right uh which is why we need to start educating people about the need of retirement planning much prior to you know the age arrives and in the report you are talking about pre-retirees and actual retirees so the perception about retirement differs very much in both of these different categories um what are some of the biggest miscalculations that people make when it comes to retirement as pre-retirees. H uh interesting. So there are a lot of distinctions as I was saying that pre-retirement postretirements your perspective uh changes entirely. Uh so in terms of numbers when we spoke to pre-retirees uh the perception of they getting lonely or they not having family support. So as compared to retired people, pre-retirees, a much lower number of pre-retirees feel they'll be lonely postretirement. Uh so in numbers maybe two times more uh of retired people think that you know they're lonely now or might be lonely soon. Uh but pre-retirees are you know gung-ho. They think that I might not be lonely at all. Right? So they don't anticipate the fact that loneliness could be a factor that they need to address postretirement. Uh secondly, a lot of pre-retirees uh as I said still think they'll actively continue working for a very long time which means they don't anticipate that the inflow of money could stop after a certain age. Right? So a lot of them think that they'll start their own venture. um they'll you know contribute to active CSR u maybe start an NGO you know uh but have something on the side which could contribute to their continuous income versus retirees retirees have already lived the life they have the reality with them um so they do not consider all of these activities another bigger challenge is medical expenses which a lot of pre-retirees do not u you know or they underestimate the quantum of medical expenses they'll have to incur. U in India the medical inflation is roughly around 14 to 15%. Which is almost uh you know uh a few times higher as compared to developed nations and within Asia the highest in terms of number. Uh what it means is that uh if somebody creates a retirement plan today uh considering that the health expenses, medical expenses could be XYZ uh if they fail to consider the medical inflation, the retirement plan could fail entirely. And these are the misconceptions that pre-retirees do not consider while they are creating their plan. Okay. Um I may be deviating but you were talking earlier about how now the current uh generation thinks that post the age of 40 it'll be a new lease of life I'll start a new venture etc. Do you think that uh you know since that we have a better work life balance as compared to maybe the previous generation that maybe retirement and savings for retirement uh will be much more improved with the next generation that they have saved up significantly higher they haven't burnt out at a younger age what's your finding or assessment I think it's the other way around okay uh when we spoke to people who are you know u who younger as compared to you know their retirement age they've considered more expenses as compared to savings okay you know so uh maybe because the previous generation had a lot of unfulfilled dreams and they could not go for these luxury vacations um India is a more wealthier nation now right in terms of wealth pyramid also the middle pyramid uh zone is increasing at a faster pace uh which means that younger people have more money now. Yes, if they have more money, um, of course, savings do increase, but the expenses also are increasing accordingly. Uh, so it's not that now since they have more money, they're saving more. They might be saving slightly higher than what they were. uh but since there are a lot of unfulfilled dreams, desires and they're exposed to a lot of uh uh digital media as well, the aspirations go up and hence the expenses also go up accordingly. So it's not the other way around. But speaking of money, um as per the report findings, a lot of people or majority of the respondents preferred investing in mutual funds versus EPF or PPF that was traditionally preferred. Why do you think that is and is this a better investment route? Uh this is a slightly controversial question. Uh but I'll kind of take another route to answer this. Um the question specifically was about what's your preferred medium to invest for retirement as a goal. Uh it does not necessarily mean that should you choose mutual funds over PPA for uh other options that you have uh even bank deposits, right? Um the fact remains that u any individual and their goal and their personality would create a permutation combination which eventually decides what kind of product do you choose. uh what's happening these days is that because of uh the active efforts of uh mutual fund sah campaigns and the other campaigns which are done by mutual fund companies there's suddenly a lot of awareness about mutual funds also during covid and you know even one year postco there was a lot of activity on the equity market side so there were a lot of demat accounts uh you know suddenly opening up because people started taking interest in equity markets right which is what is leading to the response that you know I prefer mutual funds. Uh having said that it does not necessarily mean that mutual fund is the only and the best option for you to invest for retirement. Um within mutual funds the entire retirement funds um size remains a very small component of the entire industry maybe around 10 12,000 uh crores which means that people are not actively investing in retirement funds so to say they might be investing in multiple categories within mutual funds with the goal that this money is saved for my retirement. uh it is preferred because the awareness is suddenly increased but does not necessarily mean that you know u that's the only uh product that they use for retirement. They could be using multiple products but yes it is a winner in terms of what people feel at the moment in terms of popularity of the product towards retirement. Since we're talking so much about uh people living longer now healthier progress in science etc. At the case of sounding a little bit repetitive, how do you actually retire early and have adequate savings for that? What do you need to do when it comes to savings and investments that so that you have a retirement kitty ready for yourself? Um, I think you've answered the question within the question itself. Uh, you mentioned saving and investment, right? The moment you start segregating these two, uh, you're more aware about what I need to do for retirement. Um when you're on the saving path, you know that I'm just saving some money. Uh it doesn't take care of what you need to do for the future. It doesn't take care of what goals and aspirations you have. You're simply saving some part of your uh earnings saying that I'm saving money. the moment you shift towards investing uh which is what people said that they prefer mutual funds or and the second preferred is uh you know PPF or other options as well u the moment you switch to the investment mind space that's when you realize that now I am investing for XYZ goal uh within those multiple goals retirement is a big pillar of my financial plan and the moment you do that mentally you're switching to being more aware about retirement post that you seek advice from a specialist or an adviser and you'll have a structured plan for the future ready for yourself. Okay. Now, I'm sure that behavioral aspects and the temperament of a person plays a big role because a lot of the time it's not just the intelligence quotient, it's the emotional quotient. So, can you tell us a little bit more about how behavioral aspects for pre-retirees work into savings for retirement? You're absolutely right. U so the study on retirement is not just about finances and which is why I said that when we started the study the objective was so the objective of covering the financial part of it was the last set of questions that we asked u the behavioral side of it is very different okay um in fact there's a happiness report um that's that's launched every year and according to that Denmark is the happiest nation and when They you know dug down deeper in terms of data and they realized that uh one of the biggest reasons for Denmark people to be happier postretirement is active leisure. Okay, which means that postretirement you're consciously working towards a leisure activity which also includes activity. Okay. So, knitting, painting, craft, sports, all of that includes active leisure, which means that you're enjoying your life after 60 as well, but you're staying active. Okay. Right. And that's one of the biggest reasons or the behavioral changes that people prior to retirement need to condition themselves together so that post retirement uh they're actually not just dependent on family or they're not dependent only on you know regular hospital visits, checkups. So that's not their life. Their life includes active leisure. uh within that also there are multiple things that you know people are doing uh when we interviewed them some interesting stories. Uh one of the story was that since women are getting more into business now right uh there are a lot of people in their 40s 45 age group uh who thinking about retirement but they've consciously decided that my wife is running XYZ business and postretirement I'm going to support her. Okay. So that's my goal in life now. That's my active leisure postretirement. Uh that you know we'll continue to grow our business but since I'll be retired I'll make sure that I participate in my wife's business and we grow it together. U another category is the ones that uh they want to give back to the society right so they've actively decided that uh I've registered an NGO and right now I'm not actively involved in that. I have somebody taking care of it but postretirement as an active leisure I'll start contributing entirely to that okay some people who already have a hobby or um they have a side hustle going on which is not very seriously uh taken as of now because of their corporate life um they've decided that I want to take this seriously I want to expand the business but I'm just waiting and watching till the time I reach the retirement age post that I switch gears and this becomes my life after retirement. So these are the behavioral uh things that need to be conditioned while you're approaching retirement or you know you still have a long way to go but still that conditioning could really help. Yeah. In fact uh you know was hearing about someone who's a doctor who lived till a very old age and I think having a passion and like you said active leisure that's something that is very important even postretirement. U now you spoke about the role of a financial adviser and getting experts in but what role should a financial adviser play in bridging the gap between uh retirement expectations and reality. So um we've we've been dealing as elevate with a lot of uh wealth managers or advisers. Uh something that we have realized is that uh these are the people who are very uh objective in nature. Right. Yeah. Um if if I'm your financial advisor, I need to know everything about your life. I actually need to know about your personal life more than your professional life. Uh because that's what I consider when I create a financial plan for you. Right? If I'm aware of all the aspects of your personal life, I know that you have uh maybe one child who has a dream of getting to a US university. uh you have two parents uh you know uh who are dependent uh eventually or maybe one is dependent one's not u I know that you have a personal dream of maybe getting a Mercedes XYZ version after a few years I know all of that I know your dreams I know your aspirations and I also know how much debt you're in debt plays a very important uh you know role in deciding the entire your finances. I know everything about you. The moment advisor knows everything about the client, that's where personal interactions come into the picture and that's where a robust financial plan could be created for those 100 years. Wow. And that's exactly what uh a financial adviser would do for a client. Um now there are certainly layers to this, right? Uh not everybody would need a a very u highlevel sophisticated financial advisor. Um, you could need just a few interactions with somebody to put together a basic plan for you. Maybe you're already aware of how to build your plan, but just take a second opinion on uh what you're doing. Similar to how we go to a doctor, right? Uh we have a specific problem, we get a specific solution. Uh we might be aware of what needs to be done, but a second opinion always helps. So for those people who are watching who are in their 30s, 40s and they haven't really thought too much into retirement planning, it's still a long way off is what they're saying. What is you know just if you could narrow it down to a few pieces of advice and what is the messaging that you want to give them? The first and the most important message is that please start now. Uh please don't wait even a day um to visualize your life postretirement. It may change the the vision may change but the barebone structure would always remain very similar. Uh so one is please do not wait for tomorrow day after to create your plan. Um second is u take your hobbies very seriously. Right? Um ensure that you have some sort of active leisure in your mind. Um develop that or nurture that. uh feel proud of having something uh that belongs to just you. That's another thing. Third, please take expert advice because uh you need that to be able to build a very robust financial plan for yourself and to take care of retirement as a specific goal, not just general goals which are eventually leading to investments and savings. uh specific retirement related financial plan, please get an expert advice or if you're capable of doing that on your own, uh do that on your own, maybe take a second opinion on that. Uh that's the third most important thing. I would definitely urge anybody who's even in 30s, 35, 40, doesn't matter. Please start today. Now taking into account the lifespan increase to about 100 years what is the uh corpus that people should target the average corpus in order to live comfortably. Um so what should they target is actually dependent on the persona. Uh but according to the research that we've done when we ask people what's the number that they'll comfortably be happy to retire with. Um interestingly we got numbers which were averaging to a 5 cr. Okay. Uh there were some people who even said that you know 1 cr seems decent. Uh which is what is actually troublesome. Now if you do a basic calculation on that a 1 cr number with the current inflation rate um or anywhere around 6 to 7% would last you only 7 to 8 years right which gets me back to the 15year-old cliff which means that um anybody who's aiming for just one CR uh and these could be people from multiple uh layers of the society because The research included multiple demographics you know age, gender, income etc. uh but even if we consider a 1 cr number uh with an annual expense of maybe 12 lakhs a year which is not very high u 7 years is nothing considerably right which is why the number of a 15-year cliff which means that people have actually run out of money majority of them seems to be real and seems to be alarming as well. All right, it's been great talking to you. Thank you so much for stressing on the importance of saving for retirement. It's ever so important, especially with the kind of lives that we lead to ensure that we h are financially secure uh post our retirement. So many key takeaways from this episode. The fact that financial savings are depleting within just 15 years of uh retirement due to medical inflation and general inflation is very concerning. So it is important that you start planning for your retirement. Now it's also important to have an emergency fund and also to assess your financial goals. What you need for education, health, etc. Have a financial planner because that will help in setting and bridging the expect the gap between expectations versus reality. It's also important to build a structure for the next 100 years given that we are all only going to live longer. Also nurture your hobbies and make sure that you do have an actively leisure life postretirement. I would love to know what are your biggest concerns when it comes to retirement. Have you started saving as yet? Do share with us in the comments section below and tell us some of your key takeaways from this episode. Also remember to subscribe to Personal Finance TV. I will catch you in the next episode. Thanks so much for tuning in.