At the recent Outlook Money 40After40 Retirement Expo in New Delhi, experts spoke at length on the need for retirement planning in the light of India’s increasingly ageing population, and the various investment options and tools one could consider.

One such popular investment option is the National Pension System (NPS).

At a session on whether NPS can work towards creating a corpus for one’s retirement, Saurabh Chaturvedi, national head, NPS distribution and strategy, HDFC Life, highlighted key insights of NPS.

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Need for Retirement Planning

Chaturvedi opened his session by highlighting the importance of retirement planning early in life.

He said, “Nobody plans to fail, but failing to plan often leads to failure.” He said that life expectancy in India has increased dramatically from 35 years in 1950 to 73 years now. By 2050, it is expected that 20 per cent of the Indian population would be above the age of 60. This demographic transition involves prioritising financial preparation to ensure a secure future, he said.

Financial Challenges By Age Group

Chaturvedi divided the population into different age groups, each with its own unique financial challenges: These are as follows.

a] Ages 0-18: Immediate Gratification

Children frequently value rapid satisfaction, which might impair their comprehension of long-term savings.

b] Ages 19-30: Limited Knowledge Of Savings

Young adults frequently lack comprehensive knowledge about savings and investments, leading to impulsive and risky financial decisions.

c] Ages 31-40: Mid-Career Struggles

Individuals in this bracket often grapple with lifestyle inflation and existing liabilities, diverting their focus from retirement savings.

d] Ages 41-50: Increased Responsibilities

This group faces multiple financial obligations, making proactive retirement planning essential.

e] Ages 51-60

Individuals are concerned about meeting their goals and retaining their independence as they approach retirement.

f] After Retirement: Financial Dependence

Retirees often encounter increasing medical expenses, which emphasises the need for financial preparedness throughout their working lives.

NPS – Essential Retirement Tool

Chaturvedi encouraged the adoption of NPS as an essential tool for retirement planning, describing it as the world’s most cost-effective retirement product. He also mentions some distinguishing features, which he said made it so unique.

a] Diverse Investment Options: Investments can be made across various asset classes, including equity, corporate bonds, and government bonds.

b] Flexibility: Investors are allowed to switch asset classes up to four times a year.

c] Consistent Returns: NPS has been providing double-digit returns, ranging from 12 per cent to 14 per cent as well as large tax breaks.

Strategies For Different Age Groups

To address the challenges specific to each age group, Chaturvedi recommended tailored strategies:

a] Children: Introduction of NPS Vatsalya to have early saving habits.

b] Young Adults (19-30): Focus on balanced investment portfolios and cautious decision-making.

c] Mid-Career Individuals (31-40): Prioritise retirement savings amidst existing financial responsibilities.

d] Individuals Approaching Retirement: Consolidate investments into pension products for financiReal stability.

Chaturvedi concluded his session by emphasising the need to commence retirement planning early. With increasing life expectancy and rising living costs, informed financial decisions are essential, he said.

Individuals may successfully handle the obstacles of aging and enjoy a comfortable retirement by making use of the NPS advantages and establishing a thorough financial plan, he added.