Smart tip: Protecting the past for better future

Smart tip: Protecting the past for better future

We are not as smart as we think we are.

We are not as smart as we think we are. Want proof? Watch the recent episode of Satyamev Jayate on “elder abuse,senior citizens and their life?” We all know that a lot of seniors suffer due to a variety of reasons and all these reasons somewhere deep down,directly or indirectly are connected with money or rather the lack of money.

I am going to dare a prediction. People who are in their mid 40’s or early 50’s and will become seniors soon,are going to suffer much more and people now in mid 30’s will suffer much more. It is hard to imagine. I present 6 reasons to support my prediction.

Busy racing

Money is need and to that extent being busy is fine. But we are way too busy trying to outsmart anyone and race-out everyone around us. This calls for a lot of time commitment. Obviously we have no time for anyone else,children specifically. History will thus amplify and repeat itself. We had no time for parents and our children will have even lesser time for us. We are moving across cities and our children will move across countries. It is already happening. Our parents took care of us and so we try to care for them. We perhaps spend quality time with children only on holidays; we will reap only what we sowed.

Employer Dependency

Many believe that their companies will take care of their needs when they retire. Such support is unlikely to be adequate. However,ponder over the rationality of the support formula for companies promising defined benefits; for example,if your last earned salary is going to be Rs 12 lakh pa,at a 6 per cent pension annuity rate,your company will need to fork out a corpus of Rs 2 crore just for you. Multiply that with number of employees. Do the math. Is there provision for such an outlay?

Financial drunkenness


The ones who earn well think money can buy everything without realising that lifestyle they live is so expensive that it is unsustainable and fragile if money supply was adversely affected. But they somehow believe that the party will continue forever and even if they did not save now they would make up in the late 50’s by huge bonuses,employee stock option plans etc. In addition they will become directors of companies and will earn through that route. This happens,but just for a few lucky ones – it’s a deviation and not a norm.

Poor investment

Let us just save tax,buy some gold,get some real estate,buy something that’s labelled “kids”,“pensions” and we think we’re done. Why care about financial planning – who has the time? To top it up “what’s the risk you want to take?” – A horrible marketing gimmick that has misguided every investor. Everything depends on time frame of financial goals and the resources you have. That’s it.

Insurance Love affair

The love affair with life insurance companies is beyond rationality. The 80’s and 90’s were different; going forward such affairs can cause the greatest harm to your future. Most will have grossly inadequate provisions as their money is wasted in pension policies and other poor products. There is not much time to think,so let us simply dump money here; least it will be safe.

Safe,surely,but this is a very dangerous position to be in.

Too much real estate

Some think this is the best investment. Quite true as well and there is no denial to that. However,over time value increases manifold and due to it,illiquidity and indivisibility which invariably leads to problems and litigations. What is the point of having assets that you cannot use? Buy/ keep what you can consume and no point being greedy here.

The Myth

“I will be fine”. Financially,the state also shows that it is also racing ahead in some form or manner. But we know it is always poorer than it was before; fiscal deficit is ever expanding. We will be in pretty much the same situation except that no one will fund our fiscal deficit.

At the end you will have big money in mathematical terms; but not much in value and will not last for too long. You’ll have 2-3 houses but you cannot eat bricks. Reverse mortgage may be your option,but with this you leave behind a legacy of legal hassles. Children will be connected to you with all sorts of gadgets except emotions and money. To protect the social fabric of the future of our society it is so important that our seniors are taken care of today.

— Author is Director,Transcend Consulting,