When To Retire?
According to the dictionary definition Retirement means to “withdraw from one’s position or occupation or from active working life.” In other words, when you do not have to work for your source of income for present and future expenses, you can achieve retirement
Hence, there’s no correct age to retire and the decision to retire depends on factors like:
Ø Your lifestyle goals
Ø Financial capability to sustain the lifestyle until your & spouse’s death
In order to retire comfortably, experts suggest that we need 20* our annual average household expenses plus funds required for fulfilling our wish list.
The official age of retirement for those working as employee is 58-60 (lower in the private sector); however, nowadays many successful people opt to retire early to make the most of the new opportunities life offers.
So when is the right time to hang up one’s boots? These are the points to consider about retirement:
1. Attaining the legal age- If you are working in corporate or government jobs the fixed retirement age is 58 or 60 years. For business person, there is no fixed age, but it depends on other factors, viz. if your son/daughter has succeeded in your business and they do not require your presence.
2. Attaining life Goals, Needs: As per Abraham Maslow’s self- actualization theory for achieving one’s highest potential, once a person has achieved the physiological, safety, love and self-esteem needs, he/she has realized all. Whether that is the ultimate goal for you, is your best decision.
3. Financial Safety & security: To retire comfortably, you need to have enough Retirement Corpus also called as net worth. From this Corpus, you should have multiple stream of Inflow, income regularly like Interest, Pension, Annuity, Rental etc. to support your post retirement needs. It’s obvious that you should have closed all loan liability by then and there is no loan liability outstanding.
4. Achieving Career Goals: You would have set certain career goal or milestone at various point of your career and once you have reached that milestone then that’s the time. Having achieved your desired goals in terms of climbing the corporate ladder, you may want to explore other opportunities, either as a consultant or mentor by utilising your expertise and wealth of knowledge & experience that you would have acquired.
5. Achieving Family Goals: If your children have grown up, settled in their family life & career and are financially independent, you can consider retiring if all other goals are also achieved. To elaborate further, your children should have completed their education and are married (particularly daughter/s) and settled in their life and career path.
What is the correct age to retire?
Given the healthy life styles, rising life expectancy has increased in India to average 70.8 years in 2019 (with a range of 67-77 in different parts of India), people’s attitude towards age have undergone a complete change. More and more people are actively choosing to work in their 60s and extend their career to 65 or 70 in some cases. This means that after formal retirement in Job, they continue with same Company or Group as Consultant or Advisor as most corporates wish to utilise their wealth of knowledge & expertise for some more time as long as their health permits. Many highly talented people would like to start their own consultancy or get associated with other boutique firms as Consultant, whether part time or full time or for specific assignment. Many may advise MSMEs in their areas as part time or assignment based Consultancy. Thus many people are looking at phased retirement based on their health. This may result in larger Corpus to retire.
A gradual transition from ‘very busy’ to ‘a lot of leisure time’ is preferred by all. From an emotional standpoint therefore, the trade-off has to be evaluated between continue to working professionally and the joy of leading a life of leisure. Clearly there are many factors in deciding early/timely/ late retirement, viz. family, attitude, finances and lifestyle and more. Many people are facing concerns from attitude of family members treating them as “Waste Paper Basket” and thus they may like to prolong their career as long as their health permits even though financially they are secured.
Despite all the planning that they would do, there may be risks of events happening like physical disability, costly medical emergency, a sudden turn of events (in the family) that requires huge funds outliving their assets. Hence a person should be mindful of these probabilities and have a ‘plan B’ ready to take care of such unexpected events like huge medical costs required to be incurred during Corona period by many families.
India may increase the retirement age
The current retirement age in India is 60 years. Globally, especially in the west, considerations of revising the retirement age have made significant strides in the recent past. The UK, for example, is already planning to increase the retirement age from 65 to 68 years over the next two decades. In India, it was the Economic Survey Report 2018-19 that first floated the idea of revising the retirement age, given the likely slowdown in its population growth, increase in the senior population, and growing life expectancy. Increasing the retirement age in a gradual manner will play a key role in ensuring the viability of pension systems and in reducing the financial burden on the national exchequer. Additionally, as the Economic Survey argues, it will increase female labour force participation in the older age groups. Further, an increase in retirement age will greatly support skilled and qualified seniors to remain active, while continuing to contribute to national growth.
What are the rules of Retirement?
Ø Focus on your spending and not on your earning as you have control over your spending whereas, earnings are dependent on dynamics of demand & supply and market conditions.
Ø Invest in long term investment products to avoid interest rate volatility
Ø Prepare for inflation, as we are living in uncertain times
Ø Never stop working as retirement plan can never be ‘one size fits all.’
Ø Retirement planning should begin the day you start earning
Retire rich & early is the new buzz word amongst millennium generation. They are not happy with the monotonous 9 to 5 job. They do not see themselves engaging in it till their retirement. The concept is a taboo. This leads to confusion about how to plan for early retirement. The biggest hurdle in early retirement planning is money. However its not impossible, with a little planning, prioritising goals and financial discipline, one can realise the dream of retiring early.
However, an opposing view of working longer has shown that it keeps you healthier and happier. Hence balancing it is the key.
Busy In Retirement
Retirement period was known as the sunset period of life. It might be about leisure, relaxing and pursuing hobbies. But it can also find you as busy as ever. With the advent of early retirement the concepts are changing. The advantage of early retirement is the productive years and energy available to focus on what you truly want to do. Hence retirement can actually mean when life begins, where one can be involved in a lot of fun and productive things after you leave work. Don’t think about retirement in the traditional sense, rather it’s a new adventure to be pursued after financial goals. Retirement is the time to minimize regret and maximize happiness, by working on things that you are passionate.