Should You Rely on Government Provided Social Security/Pension for a happy retirement?
I received a call tomorrow form banker in his early 50s and he wanted a validation of his mutual fund schemes. During conversation following issues came up ;
1) He is insecure about his bank’s future as he is anticipating bank either to be merged or disinvested.
2) He is also insecure certainty of his pension, though his job is pensionable
3) He doesn’t seem happy working in a democratic nationalized bank and wanted to be financially free as early as possible so that he could pursue his interests.
4) He wanted to invest aggressively to cover up time that he missed and was also considering F&O kind of risky investment vehicle
There is no doubt that after reforming the pension sector in the 2000s and introducing NPS, it’s high time the government may actively unleash the second wave of reforms to reduce the financial burden on the part of the government.
This is not the only government employee approached me with such apprehension, one of my clients working as engineering college principal with Government of Gujarat also had such apprehension when he approached me for his financial planning.
In fact, he has requested my strategy to keep the lowest amount possible into his statutory GPF . as he feels insecure that he may be deprived of the same for one or the other reasons due to departmental politics and no fault of his.
I am writing this article so that my readers working in the government may take the cue and do the necessary financial planning to safeguard considering the free economy era that is gradually being implemented since 1990.
According to Wikipedia: Planning is the process of thinking about the activities required to achieve a desired goal.
During my yesterday talk with the banker, we both agreed on having a plan-B for retirement as also for being financially free as early as possible.
Financial Freedom means your Passive Income > your monthly expenses.
In order to be financially free, you need to first have a goal to be financially free and then plan for the same.
If you rely on govt provided pension, then also you need to plan for your retirement, in case you do not get a pension for reasons beyond your control. In the normal event of you getting your pension, retirement corpus created as plan-B may be used to provide an estate to your children. But if in the unlikely event of not getting your pension, you will not be a financial burden on your children for almost 20-30 years of your retired life span.
What you should do to have a proper financial plan in place is ;
1) Create an emergency fund
2) Buy All Applicable Insurances such as life, health, etc
3) Determine the future cost of your Financial Goals/Obligation and then start SIPs/Regular Investment for the same
4) Add retirement as one of your goals, determine your retirement corpus, and invest regularly for your retirement.
If your retirement is greater than 10 years away, use equity aggressively to grow your wealth faster as compared to other investment vehicles.
You may prefer to view my video on How to Do Retirement Planning. Click here to view the same.
Conclusion: Increasingly Government employees are feeling insecure about the certainty of their government pension for obvious reasons. It’s always good to accumulate more money than less money. More money can be accumulated with proper investment planning that suits your needs and aspirations.
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