Plan early to secure your post-retirement life

Retirement is traditionally viewed as a phase of life when people would resign from activeworking, possibly to relax and worry about nothing into the future. This is substantiated with alarge corpus (savings) which would ensure the staggered income into the retirement so thata convenient and comfortable life is achieved. So, this is usually associated with higher agesof over 55 when most people prefer to settle into a sedentary life. This is also the time when mostof 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 endedand as life returns tonormal. According to the latest US jobs data, about 4.3mn have quittheir jobs in May alone which isvirtually 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, anotherpersistent factor added to the mix - inflation. According to McKinseyreport, as many as 18 per cent of those who quit are returning towork in non-traditional roles likepart-time workers, temporary gigs or even turning to entrepreneurship.

Many of them even have shifted towards a different industry even if that means leaving afinancially lucrative work. The report suggests that the desirability for more flexibility hasbeen one of the key sticking points for this trend. 65 per cent of the people who quit finance andinsurance jobs, didn't return to workforce or moved to a different sector.

The pandemicoverhang of remote work and independent work beyond the traditional 9-to-5 work hours. This isleading 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. Areport 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 thattheir new roles didn't live up to their expectations.

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

They need to find an alternative occupation whichmayn't yield any income but keeps them occupied and most importantly happier. It's notabout calculations and corpus build alone but must design a robust portfolio that withstandsthe 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 thatwould offset the negative impact of inflation. This allows the longevity of the portfolio toprovide 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 andtheir returns.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reachedat knk@wealocity.com)