Plan early to secure your post-retirement life

Retirement is traditionally viewed as a phase of life when people would resign from active working, possibly to relax and worry about nothing into the future. This is substantiated with a large corpus (savings) which would ensure the staggered income into the retirement so that a convenient and comfortable life is achieved. So, this is usually associated with higher ages of over 55 when most people prefer to settle into a sedentary life. This is also the time when most of their commitments like housing loan, children's education is taken care of.

The recent trend, however, has been quite different. World Economic Forum puts that as "The Great Resignation", an idea proposed by Prof Anthony Klotz of Texas A&M University which predicted a large number of people leaving their jobs after the Covid pandemic ended and as life returns to normal. According to the latest US jobs data, about 4.3mn have quit their jobs in May alone which is virtually unchanged from last year.

The most common reasons for resignations initially were fuelled by desire for higher pay, better benefits and more fulfilling work. While the same factors remained, another persistent factor added to the mix - inflation. As the US inflation rate hit a forty-year high, the wage growth has remained snail paced even as a near-record high job openings are available. After the pandemic restricted lives, many began to pursue diverse choices and are taking up adventurous routes to achieve their newfound freedom. According to McKinsey report, as many as 18 per cent of those who quit are returning to work in non-traditional roles like part-time workers, temporary gigs or even turning to entrepreneurship.

Many of them even have shifted towards a different industry even if that means leaving a financially lucrative work. The report suggests that the desirability for more flexibility has been one of the key sticking points for this trend. 65 per cent of the people who quit finance and insurance jobs, didn't return to workforce or moved to a different sector. The pandemic overhang of remote work and independent work beyond the traditional 9-to-5 work hours. This is leading to change in fundamental attitude towards their relationship to work altogether.

But not all those who have migrated to seemingly 'greener pastures' end up satisfied. A report found that a little over a quarter of those who quit their jobs regretted their decision. And about 42 per cent of the respondents who had returned to the workforce had found out that their new roles didn't live up to their expectations. In such instances, if one were to stick to their decision to quit and pursue their interests, one were to ensure that they're financially independent.

With the newer generation, while retirement has managed to delink itself from age, the preparedness seems to haven't yet reached. An online survey conducted by a life insurance company in India found that about 80 per cent of the respondents weren't prepared for retirement, while about a quarter of the respondents didn't even consider about retirement planning and only 18 per cent of the investors think retirement as a priority goal. The fact remains stark as only 12 per cent i.e., about one-eighth of India's workforce is covered under various pension systems. Of course, just the coverage doesn't yield they're adequately placed. Still 7 out of 10 Indians expect their children to support them in their retirement.

The first thing one needs to have in place for an early retirement is the preparedness to face the retirement. One should have clarity on what to be done post retirement. This is needed because, it's very difficult to remain unproductive or unoccupied at a stage when one is both physically and mentally agile. They need to find an alternative occupation which mayn't yield any income but keeps them occupied and most importantly happier. It's not about calculations and corpus build alone but must design a robust portfolio that withstands the erosion of money, i.e., inflation. While compounding helps one to amass larger corpus, the inverse effect is felt due to inflation. An early retirement plan would continue to hold a portfolio with higher risk profile as that would offset the negative impact of inflation. This allows the longevity of the portfolio to provide for longer periods as longer horizons would have larger effects from inflation. Another important aspect to be considered is the tax implications of the investments and their returns.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at [email protected])