The changing paradigms of pension with people living longer and healthier

You will be surprised to know that when India got independence in 1947, life expectancy rate was 31 years. Of course, there were octogenarians and individuals who got to live beyond their 90s, but with a great number of people dying young, the average came out to be 31 years.

With large-scale immunisation, improvement in standard of living, and less people living in extreme poverty, in 2005, the average person in India was living up to 64 years. Life expectancy crossed 70 years in 2022.

It means, more people are living longer, and their financial needs are going to be greater compared to people living even just 30 years ago. The approach and attitude towards pension need to change accordingly.

Previously, people wouldn’t live 20-30 years after retirement, but now, there is a great chance.

The traditional family structure is changing fast. Previously, pension or no pension, post-retirement, people mostly lived with their families. By the time they retired, their kids grew up and had their own sources of income. Expenses would be curtailed as many facilities would be shared among multiple family members. Sometimes, the pension would be spent on recreation, fun, and gifting while other expenses would be taken care of by the children. However, many elderly couples live alone these days. The cost of living may be different from those who live with their kids and grandkids.

The concept of retirement age is also changing. Even after retirement these days, people get hired as consultants or even as regular employees because one, they are ready to work at lower wages compared to younger employees, and two, they are more experienced and worldly-wise. If their health and stamina permit, they see nothing wrong being gainfully employed past their retirement age. In fact, many people want to work till the last breath or until they are completely unable to work.

The work from home culture is further enabling people to work longer. They don’t need to travel. In many instances they can even set up their own schedules. Working from home, they can get full-time employment or a part-time job.

Pension and saving plans for a prolonged future

No matter what you plan, no matter how you plan it, life can be unpredictable. If you take good care of your health you may live a productive life in the sense that you go on making money into the wee hours of life.

What if you don’t? What if you need to spend a few decades without an income? What if your spouse outlives you a few decades? Unpredictable health is not the only issue, there can be many unforeseen circumstances that require you to arrange money, and if you don’t have that money, it can be quite a disappointing experience for you.

Even if there is no hardship, maybe you want to make a career change in the later years of your life. You want to educate yourself. You want to learn a new skill. Or you want to travel. You want to pick up a comparatively expensive hobby after your retirement.

This is where wealth management can play a pivotal role. When it comes to creating and managing your wealth there is no template. You need a unique approach based on your current income, future income projections, cost of living and other unavoidable financial obligations.

Pension for professionals working in organisations, especially the government sector, gets taken care of on its own, in most of the cases. It is the entrepreneurs, business owners and the self-employed that need to take care of their own pension plans, whether they invest in financial assets or save money for a rainy day.

The earlier you start, the better it is. Start thinking about your finances from the perspective of how you plan to spend your old age. Generating wealth using your current financial resources is a serious business better done by an expert.

Does society need to change? Yes. Do we need to break stereotypes about ageing? Definitely. Do we positively need to look at the prolonging life span? Yes. Society will evolve. As they come to grips with new realities of life, policy makers, members of the society, and individuals will put more thought into how to plan pensions for a major chunk of the population who is going to seek a more productive and meaningful life for years to come.

As our collective health improves, we will be living longer. Who knows? Maybe after a few decades, 100 years will be an average lifespan. When that happens, even the age of retirement will go beyond the 70s, or even 80s.

Are you planning your finances keeping that in mind?