ArtificialIntelligence, AI, the buzzword these days is seen as both blessing and anathema depending on how one would look at or use it. AI isn’t just transforming or would be transforming how we work but also how we plan for retirement. The consensus is the disruption of traditional career paths. The earlier norm of working till 60 or 65, while accumulating a decent corpus to consume for the next 20 or 25 years is now defunct. The changing landscape on the work and career has deep impact on how we retire into the future.

Job displacement at the initial stages is the biggest risk till adaptation gains ground. As job switches frequent, the continuity for investing for long could take a back seat. Also, fragmented careers could alter the proportion of savings towards short term to relatively higher levels than the current norm. This could increase the share of unproductive or underproductive savings particularly by those who’re beginning their careers. With career path remaining hazy, the other goals could be either delayed or less prioritised, altering the whole financial planning.

Another silent demographic revolution is the increased lifespan, thanks to the advancement inhealthcare and medicines. The current life expectancy of close to 71 is projected to reach over 75 by 2050 (UN). This could turn double whammy as retirement savings shrink pushing the retirement age further. Here, the blessings of AI could act in our favor. McKinsey estimates up to 30 per cent of tasks could be automated by 2030 which could allow us to free up time for pursuing interests, hobbies, etc.

As AI automates the mundane activities, it could help individuals to focus more on human-centric skills like creativity, emotional intelligence, negotiations and leadership. The culture of gig-work could come in handy as many find ways to generate additional sources of income through these vocations and so the traditional retirement concept is broken, allowing to participate in semi-work force beyond the retirement age. This could mean fewer employer-sponsored retirement benefits, though the govt. is trying to adjust laws to the changing reality. Only 6 per cent of India’s workforce has formal pension coverage (EPFO/NPS).

Passive income through side hustles and freelancing now find more in priorities as we explore to diversify the income streams. A phased retirement where one could transition to part-time or consulting roles instead of full retirement is one solution. So, a more flexible approach to retirement helps rather than a fixated age-based approach. A 2023 PGIM MF study found that 72 per cent of the urban Indians fear outliving their savings.

Maxing out on the tax-advantaged instruments like NPS, PPF, PF and other retirement-oriented solutions turns critical than ever, even as a higher proportion is locked for contingency. Use of some of these avenues especially to compensate for the lack of employer plans is essential now. Also, structuring the investments beyond the traditional markets i.e., alternatives could help along with an exposure to AI oriented businesses/stocks. With limited social security net, it’s highly imperative for the current and next generations to build a formidable nest-egg to have a relaxed retirement. Even post-retirement savings or corpus management becomes crucial as avenues for senior citizens are limited. According to a Crisis study of ’22, the average Indian’s retirement corpus lasts 8-12 years post-retirement (assuming retirement at 60 and life expectancy of 70-75) A steep medical expense could devastate the entire retirement planning. Though, the govt. recently brought down the universal age for medical insurance cover, the extent of cover may not be sufficient. So, a proper health insurance should be availed at a younger age to gain the vintage (to cover preexisting diseases). While hope can’t be a strategy, AI could possibly benefit us in reducing the health care costs.

With urbanisation gaining momentum, assumption to have govt or family support is flawed. A self-reliant solution is the need of the hour. Be psychologically prepared that unlike our grandparents or many of our parents, a stable post-retirement income is difficult.

The author is a partner with “Wealocity Analytics”, a SEBI registered Research Analyst firm and could be reached at [email protected]