Retirement Planning for Teachers: From Knowledge Acquisition to Dissemination

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 Retirement Planning for Teachers: From Knowledge Acquisition to Dissemination

LEARNING OUTCOMES
i. To understand the relevance of retirement planning for teachers.
ii. To comprehend the common mistakes made while understanding the merit of
retirement planning
iii. To inculcate the pride of superior knowledge reservoir of bhartiya culture about
retirement planning
iv. To understand the way to sensitise the students about the retirement planning.

Introduction

Retirement Planning is perceived as strong indicator of financial freedom or independence but

the question is how much the faculty members of business management and commerce and other
disciplines are aware about it and how much are they in the position to acquaint others about
retirement planning. As Ms. Monika Halan, Consulting Editor and part of Leadership team at
MINT, has rightly pointed in her book ‘Let’s talk Money’, “You are financially free when you
don’t need to work to pay your bills. You have enough assets that generate enough income today
and for the rest of your life”. With the excellence of wit, she mentions that some people say that
the money put in retirement planning is the ‘Go to Hell money’ because it would be used after a
long gap of time and you have to curb your desire to use the money immediately. So it is
advisable to read her book where she has equated retirement planning with OXYGEN MASK.

A recent survey called H​SBC Future of Retirement Study has conservatively observed that about
half of people in India are not planning their retirement properly. One of the research scholars of
Banasthali has concluded in her research that teachers in general do not have much awareness
and concern about the retirement planning and relatively the married women teachers are more
concerned about the retirement planning. As the knowledge flows, in general a comfortable
retirement is becoming a priority in life, however at the Centre for Personal Finance at

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Banasthali Vidyapith, our research points that many teachers still are ignorant about the
retirement planning owing to the aspects like, I am too young to think about it, I would work
even after retirement or I would retire late, I have good wealth, or I will anyway have 50 lacs in
my PF at retirement, or retirement planning is just a gimmick and so on.
But let me tell you that most of the above views rest on weak foundation. And therefore we as
the teachers should not only be more aware about the ​retirement Planning but also look to
sensitize our students, colleagues and others to meticulously plan for retirement and the common
mistakes mentioned below about the retirement planning which we should ​AVOID:
1. The first is that retirement planning should not be viewed as the only issue of personal
financial planning. There are many more like estate planning, tax planning, liquidity
planning, expenditure planning & budgeting, investment planning, risk management and
philanthropy. In fact there are other goals also like repaying the old loan or expenses on
upcoming wedding or education of our dependents.
2. The second is underestimating the expenses of the future. This is further explained by the
fact that inflation eats our money and therefore if the estimated expenditure for someone
is 50000 per month in January 2030, than at an assumed inflation of 7%, this amount
would shoot to how much in January 2040? Definitely it will be about 100,000 per
month.
3. Another mistake is the perception that retirement planning is the exercise worth doing in
the last 10 years of the job. This is not the right approach, the earlier the better.
4. Next error is the belief that retirement planning is all about ensuring a regular income.
And therefore just look for investments that would give a monthly income or be entirely
dependent on the pension. However, friends what about a sudden requirement of large
amount of money to meet a contingency.
5. With this, the next mistake is lack of strategy to estimate contingencies. Researchers have
shown that those who are unprepared have to pay a heavy cost to manage unforeseen
situations.

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6. The sixth mistake is confusion about your post-retirement lifestyle. Would you live more
lavishly? Or be very conservative or depending on situation? Needless to mention these
involve different requirement of money.
7. Underestimating the merit of healthcare is yet another mistake. In unfortunate case of
hospitalization of you or your dependents, substantial financial hit is imminent unless you
have a well thought health care & cover policy.
8. Dear teachers, finally, some people ignore the merit of diversification. Investing only in
the Bank FDs or only in equity mutual funds or only in gold has its own dangers. Infact it
is really worth to consult a personal financial planner to find out which asset mix and
choice of avenues would be suitable for you in wake of your investment objectives,
constraints, goals and the environment.

All the teachers need to understand the various investment avenues, nature and associated risks
and acquaint the students about them. If the students start early on retirement planning after they
get a job, than in long run it would be a significant contribution of all the concerned for social
security of the nation. If there is any question on retirement planning, readers can send their
queries on the below given email.
fp@banasthali.in​.

Some Important aspects of Retirement Planning

1. While regular income is not everything when it comes to ​retirement planning, but those
who are mainly looking for retirement planning with a regular income, should go for
monthly income scheme, reverse mortgage, combo of systematic investment
plan-systematic withdrawal plan, fixed deposits or bonds with monthly interest, NPS and
annuity. All of them have their merits and shortcomings and require an optimal mix and
this is one more reason to consult a personal financial planner who is like a financial
doctor.

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2. Although not the best one, but under the ​reverse mortgage which is the opposite of home
loan, the bank provides monthly payments to the owner of property till the owner is alive
or desires. After death, the bank may sell the house or ask the legal heir to settle the dues
and if not the bank recovers its dues by selling the house and gives the balance if any to
the legal heirs. There are different schemes, but not much popular and pushed by the
banks. Renowned finance journalist Ms. Vivina Vishvanathan at the MINT has authored
a very good article on reverse mortgage which one may google and read. She has quoted
an example that for a 1 crore Rs. property, the bank may pay Rs. 8200 every month upto
20 years and after this, even if the owner is alive, she can live in the house till her death.
If one wants higher monthly payment, conditions may change. In certain cases reverse
mortgage is a better option.
3. The bhartiya perspective in retirement planning is indeed very strong. We need to
understand that the bhartiya perspective is deeply rooted in law of karmphal and the fact
of rebirth. As of now I have discovered five perspectives which I call the panch-siddhant.
The first perspective is that with the time we should keep reducing our desires. Sri
Aurobindo has suggested conquering the desires. Bhajans by Baba Gorakhnath and Kabir
and Gurunanak dev have advocated a control on the senses. Now what’s the impact?
Reduction in expenditure which in turn takes care of inflation to a large extent and leads
to peace. The second is that if we impart the right sanskar to our children, they would
take care and support us. In fact you would be happy to know that 70% of Indians as per
a HSBC survey mention that they are confident of their children supporting them after
retirement. How many in the west can claim so, not many. The third is very interesting,
do not save too much that is beyond what you may actually need. The western view is
that money says, save me today and I will save you tomorrow, while the bhartiya
perspective is that money says that I will not go with you after death but my goodness
can and so if you spend and invest following the dharm, you will have more confidence
when you say bye bye to the world. The fourth is that do not plan your retirement kitty by
snatching the money from others, it does not help. The final one requires a deep thought

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that even if you face some hardships and do not have adequate money which leads to lot
of sufferings perhaps that is because of prarabdh that is our actions or karm in previous
births. A person with wisdom would always forgive those who have troubled him, accept
the sufferings and desire not to take the next birth.

SUGGESTED MONTHLY SAVINGS SCHEMES TO RETIRE COMFORTABLY

(Courtesy, Business Today 2014, weblink,

https://www.businesstoday.in/moneytoday/cover-story/retirement-planning-tips-avoid-mi
stakes-invest-ppf-insurance/story/211048.html​)

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Courtesy: Principal Retirement Advisors

Phase I : The Past

Examining the past, taking stock and organizing investments, if required making
recommendations to reorganize.
Most people don’t start out with a clean financial slate when it comes to planning for their future.
In order to create a financial planning strategy for the future, it is imperative that one should
examine the past and identify corrections to be made, if any. Existing investments, debt and
spending habits are some of the areas of the financial past that need to be addressed before
moving on to planning.

Phase II : The Present

Structuring the present, evaluating the earnings pattern, spending pattern & savings pattern and
restructuring if required.
The money earned, as well as the spending that you are currently committed to, greatly affects
how much you are able to save towards the future. Creating a plan for reducing current spending
and paying off debt as quickly as possible can assist greatly with making and executing a
financial plan.

Phase III : The Future – Intended and Extended

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Having analyzed the past and present, evaluate if things should continue to be done the same
way OR require to be realigned to the needs and demands of the emerging future.
Future plans will not work out well unless you have a solid foundation of understanding of your
financial past and present. Having done that, this phase becomes simpler to establish and
execute, as well as making it much more realistic.

Enrichment Exercises:

1. Search for retirement planning calculators on google, for instance the ones available on
the links,
https://www.moneycontrol.com/personal-finance/tools/retirement-planning-calculator.ht
ml or ​https://www.personalfn.com/calculator/retirement-calculator and ask few of your
friends to fill details and give views on the extent to which they are prepared for
retirement. After calculating the final score, is there any change in their viewpoint? What
could be reasons for the deviation? Analyze.
2. Ask a local bank to introduce you to some of its customers so as to assess their
preparedness for retirement. In what way the bank can be of help in planning their
retirement?
3. Visit website of banks, NBFCs, PO office, PFRDA and Mutual funds to figure out the
investment options useful in retirement planning.
4. Visit websites of PSU banks of India. Do they carry exclusive set of information for
retirement planning?

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