The Death of Traditional Retirement: Why You Should Invest For A 100-Year Life?

There is a notable shift in India concerning the golden years of retirement. The era of a two-decade retirement cushion is no longer feasible. Given that life expectancy is anticipated to reach 78 by 2025 and coupled with sustenance in advancements within medicine, working professionals need to plan for a 30-40 year-long retirement. This mind-blowing change calls for rethinking the entire strategy towards retirement.

Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited, explains: 'The 60-year retirement life plan is demanding change. We are moving into an age where there is more than one shift in career and required to extend lifespan focusing on retirement.' This holds true for India, where the inflation is set at 6% year on year, while healthcare expenditure surges by 10-12% annually.

The old-aged pencil-and-paper method clicked, but the drawbacks are coming to the surface. The immediate income payers SCSS, Senior Citizen Saving Scheme, at 8.2 percent or Post Building Society Monthly Income Plans, at 7.4% interest, do not match the inflation levels after taxes. CA Jeevan Jagetiya, the director of JJ IPO Advisors Pvt Ltd, warns that "What looks like a safe 7% return in today's context is actually a negative return after inflation and taxes. Conservatives with a retirement corpus are now something Indian's cannot afford to be."

Retirement today requires planning on three fronts: long-term growth, reliable income assets, and reserves for liquidity that can be drawn in case of emergencies. Equity investments through SIPs in index funds have undergone a 12% CAGR over 20 years. This makes them crucial for beating inflation. The National Pension System (NPS) provides tax-efficient returns that are linked to the market, along with section 80C and 80CCD deductions of up to Rs 2 lakh.

As pointed out by Aman Gupta, Director of RPS Group, "Traditionally favoured by Indian investors, real estate seems to require a fresh look. While physical property comes with maintenance hassles and illiquidity, REITs (Real Estate Investment Trusts) offer exposure to the sector with better liquidity and professional management. For guaranteed income, deferred annuity plans allow investors to lock in rates early. Others who prefer quick payouts during retirement would use immediate annuities."

Rethinking the entire idea of work done at 60, the psychological side of retirement planning becomes equally as important as exercising flexibility.

Many semi-retired individuals find they enjoy part-time consultancy or teaching positions and even monetizing their hobbies. This shift is explained in the words of Maurya: 'Retirement should be about freedom to choose how you spend your time, not a withdrawal from all productive activities.'

While government schemes continue to be the primary source for retirement planning, they form the basic foundation which must be built on with aggressive-growth investments. The Pradhan Mantri Vaya Vandana Yojana (PMVVY) offers 7.4% returns for seniors, and Sovereign Gold Bonds offer protection against inflation, though these should be part of the investment portfolio, not the entirety.

Younger professionals are best to start their investments in their 20s, as time is their greatest asset, allowing for the magic of compounding to work. Even with modest SIPs of Rs 5,000 per month in equity funds, one can exceed Rs 1 crore in 30 years with 12% returns. Those in their 40s and 50s need a balance of growth and capital preservation, while those approaching retirement should focus on income generation and maintaining minimal growth assets to counteract inflation.

It is as Jagetiya says, 'The new paradigm of retirement isn't about accumulating a fixed corpus and living off it.'

"You have to work on generating multiple income possibilities that can be used over the span of around four decades of retirement." This statement implies an ongoing process that involves checking and refining one's portfolio with respect to life events and market opportunities.

Opportunities and challenges come with a 100-year life plan. A plan that includes various age milestones allows freedom of flexible spending with careful allocation of funds. Financially smart Indians who embrace this plan early on will be able to live a long portion of their life without the hassle of not having financial stability.