Retirement Preparedness in India: A Year of Progress and Persistent Challenges
Retirement preparedness in India has seen a notable improvement over the past year, with more individuals recognizing the importance of early savings. According to the Max Life Insurance’s India Retirement Index Study (IRIS) 4.0, conducted in partnership with Kantar, close to 44% of Indians believe that the ideal age to start planning for retirement is 35 years. This shift in mindset is reflected in the overall retirement preparedness index, which has risen from 47 to 49 points, indicating a gradual but positive trend in financial planning for the future.
Despite this progress, financial uncertainty continues to loom over a significant portion of the population. The study reveals that 31% of respondents are unsure about how much they will need to maintain their lifestyle after retirement. This lack of clarity poses a considerable risk, especially as life expectancy increases and the need for sustainable financial resources becomes more critical.
Majority Fear Running Out of Savings Too Soon
A striking finding from the IRIS 4.0 study is that 57% of urban Indians fear their retirement corpus will be exhausted within just ten years. Alarmingly, 30% of respondents worry that their savings will last only five years or less. Another 27% estimate their savings will last between five to ten years, underscoring the vulnerability many face in maintaining financial stability throughout their retirement years.
Prashant Tripathy, CEO and Managing Director of Max Life Insurance, emphasized the urgency of addressing these concerns. "As life expectancy rises with advancements in healthcare, there is an increasing need for long-term financial planning. The IRIS 4.0 study reveals that while Urban India’s retirement index has improved, one in three Indians still feel underprepared," he stated.
Regional Disparities in Retirement Readiness
The study also highlighted significant regional disparities in retirement preparedness across India. The East zone emerged as the leader with a preparedness index score of 54, outperforming other regions in financial, health, and emotional readiness sub-indices. The West zone showed improvements in both financial and health indices, while the North and South zones experienced slight gains in health preparedness. These regional variations suggest that localized strategies may be necessary to enhance retirement readiness across the country.
Life Insurance: A Pillar of Retirement Planning
Life insurance remains a cornerstone of retirement savings for urban Indians, with 97% of respondents aware of its benefits and 67% already invested in such products. Health insurance is also gaining traction, with 37% of respondents covered, reflecting a growing awareness of the critical role healthcare plays in retirement planning.
“Today, more urban Indians recognize the importance of starting retirement planning early, with a growing preference for life insurance as a savings tool. Notably, urban Indian working women are taking the lead in investments, actively securing their financial futures. These trends highlight a positive shift towards proactive retirement planning and financial independence among urban Indians,” Tripathy noted.
The National Pension System (NPS) has emerged as a trusted investment option, with over 90% of respondents viewing it as safe. However, despite high awareness, only 17% have invested in NPS. Mr. Ranbheer Singh Dhariwal, CEO of Max Life Pension Fund Management, pointed out that many people find the NPS process complicated, with around 53% of respondents indicating they need assistance navigating it.
Gig Workers Face Greater Retirement Worries
The inclusion of new demographic segments such as gig workers and DINKs (Double Income No Kids) in this year’s study revealed concerning trends. Gig workers scored only 46 on the index, indicating significant gaps in their financial preparedness. Key concerns for this group include meeting basic needs (76%) and affording luxury expenses (77%) during retirement. Additionally, 75% expressed anxiety about securing their children’s future, highlighting the precarious financial situation faced by many gig workers.
Women Taking Charge of Retirement
A positive trend emerging from the study is the increasing participation of urban Indian women in retirement planning. Women scored 50 on the retirement index, outperforming men by one point. The study revealed that 68% of working women have begun investing for retirement, a 7-point increase from the previous year. Encouragingly, 66% of women feel confident that their current investments will provide financial security in retirement.
As financial literacy and proactive planning grow among women, the study indicates a promising shift towards greater financial independence and well-being.
Indians’ Delusion About Retirement
The IRIS 4.0 study also uncovered a striking disconnect between expectations and reality in urban India’s retirement planning. An overwhelming 67% of respondents expect to live with their children during retirement, yet only 55% currently live with their parents. This gap highlights a significant misunderstanding of changing family dynamics and could leave many unprepared if their expectations are not met, potentially leading to financial strain.
Moreover, the study revealed a similar delusion regarding health. While 83% of respondents believe they will remain healthy in retirement, only 16.72% engage in regular physical activity, and just 38% undergo yearly health checkups. This mismatch between health optimism and actual behavior reflects a critical area where individuals are failing to take proactive steps. Without addressing this gap, urban Indians risk facing serious health complications that could further strain their retirement finances.