What is the outlook for tomorrow? Simply, what is the future for the working professionals in the world today, and especially in India?
The professionals today slog away their life at office, to survive through all the mayhem and chaos called advancement and competition. Running the rather inelegant rat race everyday for the better part of their youthful life in the dream of building a better future, they often don't stop to think about what the future actually holds for them.
Yesterday, I was having a discussion with my good friends and colleagues about a thought that has been bothering me for quite some time now. I started off my lunch time discussion with the question -
When is the first set of software professionals in India due for retirement?
While it may seem like a silly question, I feel it is quite important to ask. Though the roots of the present IT industry in India took form as early as 1968 with the formation of Tata Consultancy Services, the software industry as we know it today started taking shape in the early nineties. The emails that we send out in hundreds everyday began as services only in 1991 by VSNL. Having said this, the first lot of software industry professionals, even those who have been in the line since the 1990s, will be retiring in the next five years and thereon. Now let us suppose that the average person in India lives to an age of 80, what with the advancements in the field of medicine. So, by what means does a retired IT professional survive from the age of 58 to 80? We do not know yet, because we do not yet have a proper sample population of people who have retired from the industry and survived the post-retirement phase, thus providing the experiential data.
In the days of our father and fore-fathers, government jobs were the sought after positions, while a section of people worked for private companies that dealt with different sectors like pharmaceuticals, consumer goods, insurance, banking, manufacturing, etc. I am talking about the time before the IT boom. The average middle class man lived a simple life with fewer commitments, a slow yet steady money saving mechanism and fewer wants. It was the time before EMIs, housing loans, car loans, etc. The time before mobile bills, internet bills, etc. The biggest expenses were that of building a house and conducting the marriage of a girl. Those were days when foreign travel and lifestyle was even forbidden or viewed with displeasure, citing religious and cultural reasons. While the charm of the west was always there, the lust for the west had not caught up with us. In such times, a man could serve a company with a straight record of 20+ years and gain the benefits of pension, provident fund and gratuity. Beyond retirement, he still had a financial security and the amount he received as pension was sufficient to fulfil his lifestyle needs for the rest of his natural life.
Today the scenario has changed. The number of years that a person ends up paying a housing loan is often longer than his professional life! People pay large sums as EMIs every month for the next 20-odd years so that they can own a piece of land or a flat in the city. Investments are made, more for a tax relief than with the future in mind. Monthly budgeting is slowly becoming a redundant activity, as it often ends up as dejection, when comparing it with the actual expenses at the end of the month. Saving money every month becomes a struggle with all the commitments that loom before us. The consumer price index (CPI), which is basically a measure of the change in price level of consumer goods and services, stands at 126 today. It is expected to hit 158 by 2020. The inflation rate in 1996 was 10.41%. The inflation rate in 2015 was 6.32%, hitting a high of 11.17% in 2012. Still, considering the prices of commodities and services today, a 6.32% is still high when you consider the continuously rising population in the country today thus increasing the demand for the commodities.
Thus, people end up making all sorts of choices such as
- living on-site in a developed nation, earning money, building foreign exchange, purchasing property and living of the savings after retirement
- trying to climb up the corporate ladder as soon as possible to earn more, saving more, purchasing a property and living of the savings after retirement
- starting a self-employment initiative while still in a job, earning a little more, saving a little more, purchasing a property and living of the savings after retirement
- simply, forgetting about the future, and just enjoying the present moment in life (which is not recommended considering the volatile socio-economic environment that prevails today)
No matter how much of foreign exchange you stock up in the bank or how much investment you make in a property, it still does not prepare you entirely for the future. It gives you no guarantee that it would alone suffice, for you to live your regular lifestyle after retirement and until death. The saving you have will have to cover for your personal expenses, medical expenses, child education expenses, luxuries and other financial commitments. With the growing rate of inflation, the rising population, the depletion of natural resources, the increasing demands for daily commodities, and the ever-present contingencies, your personal savings are always at threat of depletion.
Next, Child education.
Now that alone is a big scary beast to deal with. My parents finished their entire schooling at a cost with which I am only able to buy a book today. And I finished my entire year’ studies at a cost with which I can buy only a book today. Capitation fee was not a concept in the days of my schooling. There was only a small amount collected called Building Funds. Today, you need to be prepared to spend a fortune on your child's education, right from play school to high school. Parents want their children to study engineering so that they can get a good job in a multinational IT company! I see people holding degrees in advanced sciences and technologies crunching away numbers and text in an IT company. No one really does anything that is actually related to their education. The moment education and employment are differed in their purpose, there begins a professional journey that is probably driven more by wants and commitments than by passion.
So we actually have a young population that has studied for a field, but works in another field, holds no other professional survival skills, and is probably least prepared to handle the post-retirement phase except blindly relying on their investments and immovable assets.
Moreover, most of the younger population today get married in their early or late 30s, waiting till they ‘settle down’ in their careers. Then they have children in their late 30s or early 40s because that seems to be the obvious next step and also because of societal and family pressures. But what they may not yet realize is that their children will be at an age for higher studies or marriage by the time they are approaching retirement. India being the land of traditions, and with children depending on their parents even till the age of 25, what is the reprieve for those parents (us in the next 10-15 years) who also have to ensure a better future for their children even if they have retired? It does seem today that most of them do not know if they really want a child or not, and simply go ahead with it because the society demands so. They do not know if they will be prepared for it financially, and think they can simply take it as it comes.
So, if our savings alone will not be sufficient to ensure our survival for the 30-odd years post retirement, what else can we do? Can we take up another job post-retirement? Well, that really depends on how much ego you are ready to let go, and how much trust your would-be employer is ready to place on you. At 58, is a person really physically and mentally prepared to take up a job to meet his/her expenses? Even if one was ready, there is still the younger generation to compete with, a generation that is young and driven by the mad rage and desire to win the rat race.
Every year, the number of students completing studies and getting ready for a job is higher than the number of people retiring from the private sector, especially the IT sector. So companies always replace old blood with young ones for obvious reasons. This being the case, the chances that one would find a suitable long-term employment at 58, post-retirement, does not look bright.
With increasing inflation, the buying power of people gradually reduces as their financial future is always at risk and remains in focus. Eventually, people are going to want to hold on to their money more and more. So any ideas to make money by avenues such as renting out a property may not really bear fruition as far as securing your financial future is concerned. The rent that you may receive is more needed for the maintenance of the house than your daily needs. These being the case, a rent from the property will alone not suffice to sustain your lifestyle.
It does seem like the entire world economy is like a water bubble, ready to burst any time, what with the increasing world population, collapses in the banking sector, devaluation of gold and rates, growing terrorism and many other factors. We even do not know if the assets we hold will have the same value twenty years from now. We are trying to live in ignorant bliss within this bubble, believing that today is a good day and tomorrow would be good too.
But we never really have a confident answer to the questions – how will I survive after retirement at 58? Will my personal savings last?
But one sincere thing that we can do for ourselves - Always keep the future in your mind, think about it.
Plan for the future as much as you can.
Save whatever you can.
Take wise decisions relating to finances, property and personal life.
Remember, your retirement date will come sooner than you think.
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