A whopping 95 percent of respondents “adhere” to their retirement plan, while 54 percent follow it precisely, and 41 percent miss out on a few aspects occasionally, according to the PGIM India Mutual Fund Retirement Readiness Survey 2023. However, even if respondents had a retirement plan in place, there are a lot of Factors Affecting Retirement Planning decisions of people. 

Sixty-seven percent have a retirement plan in place, while 63 percent believe they have a comprehensive one. Regardless of a retirement plan, fixed deposits (FD) are the most preferred investment vehicles among the respondents.

FDs bagged the top place in the survey, followed by annuities or insurance policies, gold, post office saving schemes, mutual funds, National Pension System (NPS), and Public Provident Funds (PPF) when asked about their preferences. 

Also, more Indians know retirement schemes like NPS, where investments have grown from 5 percent in 2020 to 15 percent in 2023. Similarly, PPF investments rose from 3 percent in 2020 to 13 percent in 2023.   

Those who have a financial plan in place also prefer investing in mutual funds compared to those who don’t have a retirement plan. The study shows that people with no retirement plan invest in gold and post office schemes. 

So, which factors affect peoples’ retirement planning decisions? Let us explore. 

Job Insecurity And Unexpected Health Expenses

According to the survey, more people worry over unexpected events like job loss or health issues. Around 77 percent of the respondents in the metro cities, 83 percent of self-employed people, and 78 percent of those who earn less than Rs 50,000 worry about unexpected things while planning for their retirement.

The fear of income loss and unexpected medical expenses has pushed people to plan for retirement in the post-pandemic world. People’s concerns in 2023 have increased by 21 percent from the 2020 survey. Illness, hospitalization costs, and sudden loss of family members motivated them to do financial planning.

Macro-Economic Factors

Now, people pay more attention to inflation and other economic conditions. Slowdown, a lack of alternate income sources, and fear of losing income are key concerns prompting people to do financial planning. For 56 percent of the respondents, inflation is the main worry, followed by health expenses and economic slowdown, at 52 percent and 50 percent, respectively. Other worries include no family support. The lack of an alternate income source is also a significant concern at 38 percent, up from only 8 percent in 2020 making it one of the important factors affecting retirement planning. 

Cultural Shift

As per the report, around 48 percent of people expect little or no financial support from family members in the future, a key trigger behind retirement planning. The number of people who do not want to be dependent on their children or other family members post-retirement rose from 26 percent in 2020 to 43 percent in 2023, suggesting that parents are not only worried about their

financial well-being but also for their near and dear ones, and they want to save to support them financially.  

The pandemic has also changed the views regarding joint families, especially related to financial security. Nuclear families now consider themselves more financially secure. The report finds a significant decline in the number of people who feel financially secure in a joint family. This percentage has reduced from 89 percent in 2020 to 70 percent in 2023. Furthermore, the percentage of those who feel financially secure in nuclear families has risen from 64 percent in the previous survey to 74 percent in the 2023 survey.