Planning for retirement brings positive outlook

In follow up to the survey of retirement readiness of Indians conducted during December ’19 and January ’20 by PGIM India Mutual Fund, a new study was done with over 3,000 participants across nine metros and six non-metro cities across India. There’s a visible change in the perception and importance in the priority for retirement since the last survey. Retirement picks pace in metros moving from the 8th position (the last) to the 6th position of priorities.

The impact of pandemic has a noticeable attitudinal variation in terms of planning for the future, particularly for the long term. There’s also a heightened awareness with 56 per cent of the respondents towards macro-economic factors like inflation, cost of living and slowdown in economic conditions. Further over half of the respondents (52 per cent) cite that the health of the family members as a key cause of worry while 39 per cent of them are worried about creating an alternate income source compared to a mere 8 per cent in the earlier survey of 2020.

The survey finds that post-pandemic, many Indians have started putting more emphasis on long-term commitments like medical emergencies and retirement planning, in addition to family security. Amongst the 48 per cent of the respondents, who underwent changes after pandemic, 100 per cent of them reported experiencing financial changes, 88 per cent reported they experienced behavioral changes and 78 per cent reported they experienced attitudinal changes.

Health, fitness & savings for emergency is gaining prominence. Providing for medical emergencies is placed at the 4th position and improving lifestyle to the 5th among the priorities. Being fit is featured just after the retirement planning at the 7th position. Those who planned for their retirement generally started it around at the age of 33 and those who haven’t intend to start in their 50’s.

About 67 per cent of the respondents of the survey have confirmed to have a strategy for retirement in place; this is higher than that of the last survey in ’20 which is fell short of the half of the respondents at 49 per cent. Interestingly, close to half of those who don’t have a retirement plan in place mentioned that they don’t need a financial plan to achieve their goals in life.

Planning for retirement is found to be associated with positive attitude towards work and life. According to the survey, 67 per cent of the respondents who planned for retirement overall have a positive outlook about work and life. Those who feel prepared for retirement (67 per cent) have a sense of good health (68 per cent), acknowledge that they have a secure job (69 per cent) and less job-related stress (68 per cent) and are prepared with a contingency plan, in case of money exhausted during retirement (88 per cent).

Except for the parameter of alternate income which dipped from 75 per cent to 73 per cent rest of the parameters have improved in 2023 from 2020. More respondents (42 per cent from 23 per cent) are now aware of financial investment providing returns on money which could be a secondary income source. 44 per cent Indians have found generating secondary income from their unique skills up from 39 per cent in 2020.

Amongst whom have a retirement plan (67 per cent overall), the distribution is 73 per cent in tier 1 cities and 74 per cent hold government jobs. Those who reported having a retirement plan (67 per cent), almost all of them (95 per cent) adhere to it - 54 per cent say they follow it diligently and 41 per cent say they miss out only on a few aspects. Survey finds out that the Indian investors prefer Mutual Funds (MF) over direct equity or Exchange Traded Funds (ETF). The 23 per cent of respondents have invested in MF, from 10 per cent in ’20 while direct stock/ETF came down to 7 per cent from 18 per cent.

Remarkably, only 59 per cent of post-retirement investors prefer deposits ie, recurring/ fixed from 71 per cent in ‘20, despite the higher interest rates. 50 per cent of prefer gold in their post-retirement investments which almost doubled from 26 per cent in ’20. National Pension Scheme (NPS) has featured triple the respondents at 15 per cent from 5 per cent in ’20.

Indians with a retirement plan in place are a bit more open to MF than those who don’t have one. While Fixed/recurring deposits at 63 per cent and 57 per cent of them prefer annuities or insurance policies while 24 per cent in MF among those who have a retirement plan while it stays at 51 per cent, 43 per cent and 21 per cent for those without a retirement plan, respectively. Those without a retirement plan have higher allocations to gold (53 per cent), Postal savings (38 per cent), NPS (17 per cent) and PPF (14 per cent) while those with a plan have allocations at 49 per cent, 36 per cent, 14& and 13 per cent respectively.

56 per cent of the respondents worry about inflation in 2023 up from 23 per cent in 2020, 50 per cent on economic slowdown from 28 per cent, 39 per cent on lack of alternate source of income up from 8 per cent, 34 per cent of them on accidental disability/ critical or terminal illness up from 16 per cent and 22 per cent worry about loan or liabilities up from 19 per cent. Cost of living, lack of support from family in future and living for longer than money saved from have come down in 2023 compared to 2020, respectively from 57 per cent, 50 per cent and 40 per cent to 50 per cent, 48 per cent and 37 per cent.

The pandemic has had a significant impact on family dynamics. Nuclear family set ups are regarded as financially free and secure as compared to joint families. 74 per cent of them feel that nuclear family provides a sense of financial security up from 64 per cent. A small improvement of 1 per cent point to 80 per cent for those nuclear families with parents while joint family (with siblings, etc.) has seen as significant down to 70 per cent from 89 per cent.

Very few (15 per cent) reported to have a written plan generated by an advisor. Around two-third of the respondents who reported to have taken a financial advice, took it from insurance agent. About half of them, 48 per cent from bank RM and about one- third are from independent financial advisor. Majority, ie, three-fourth of the respondents get influenced by family and friends to approach a financial advisor. Percentage of those valuing their advisors to reduce the workload on managing money has almost doubled from 24 per cent to 54 per cent.

Better accessibility, good qualification, ability to service online and provide multiple financial services reflect the expectation changes after the pandemic. Two-thirds of the respondents reporting financial anxiety, feel it affects their productivity for at least half of the day. Guidance from employer still has a significant impact on employee’s retirement planning as 88 per cent of them felt it would help. The pandemic has exposed most of us to the reality of having a contingency plan and need for a comprehensive insurance plan (both life and health).

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