More people consider keeping money in banks through Fixed Deposit (FD) or Recurring Deposit (RD) as a suitable option for retirement planning compared to investing in mutual funds or NPS, according to a study.

According to the India Retirement Index Study (IRIS) by Max Life Insurance in partnership with KANTAR, a marketing data and analytics company, Life Insurance is considered as the most suitable option for retirement by a majority of the respondents. Life Insurance is followed by Bank FD/RD, Health Insurance, Mutual Fund SIP and National Pension System (NPS).

The study found that awareness of Life insurance (LI) is the highest among respondents, followed by FD/RD, Health Insurance, Mutual Fund/SIP and NPS.

With respect to retirement planning, 2 in 3 consider LI to be the most suitable product, the study found. However, respondents, who participated in the survey, have also shown a rising preference towards investments in real estate, gold, and NPS.

The survey assessed urban India’s preparedness to live a healthy, peaceful, and financially secure retired life. For the digital study, as many as 2,093 respondents were surveyed across 28 cities in India.

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The study revealed that urban India’s retirement index (on a scale of 0 to 100) has risen to 47, a significant upward movement from 44 witnessed across the past two editions.

The retirement index comprises three sub-indices mapping – health, finance, and emotion, and indicates an uptick across all three parameters. The improvement in retirement preparedness comes at the back of a significant rise in health awareness that has moved 3 points to 44 in IRIS 3.0, from 41 in IRIS 2.0.

“This edition shows progress in India’s retirement preparedness, which also signals the country’s stronger economic resilience. Today’s working population will be tomorrow’s large, retired population. And it is imperative to register the urgency to plan for our retirement years as India manages its aging population and embraces longer lifespans,” said Prashant Tripathy, Managing Director & CEO, Max Life.

India’s Outlook towards Retirement

IRIS 3.0 reveals that urban Indians increasingly equate retirement with a stress-free life. Viewing retirement as a harbinger of positive life change, the retirement sentiment in Urban India has increased to 73 (+3 from IRIS 2.0).

Today, 7 of 10 people associate retirement with positive emotions such as ‘time for family’, ‘tension-free life’, ‘more independence’, and ‘greater prospects of luxury/travel’, while the remaining associate the phase with negative sentiments of ‘unhealthy lifestyle’, ‘uninteresting life phase’, ‘lessened savings’, and ‘lack of purpose’.

Corroborating the positive outlook, 59% of Indians continue to prioritize health while planning for retirement, with only 33% considering ‘finances’ as an important lever, and 8% regarding ‘emotional support’ as the most crucial aspect.

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Is India financially prepared for Retirement?

The IRIS 3.0 study reveals that nearly 1 in 3 urban Indians are worried about their savings depleting within five years of retired life. Equally alarming is that 2 out of 5 individuals have not started investing for retirement yet.

A significant majority believe that they have enough family wealth, and/or be taken care of by their children, which poses a disproportionate barrier to retirement planning. In fact, as high as 9 out of 10 respondents above the age of 50 years regret not starting savings earlier for retirement.

However, as a silver lining, 1 in 2 urban Indians favour prioritizing long-term savings planning at the start of their working careers. Also, a majority of respondents (38%) believe that one should start retirement planning before 35 years of age.

As investment preferences for retirement goals, life insurance products lead the way with 95% awareness and 75% ownership levels. Additionally, the IRIS 3.0 study revealed that while 64% of urban Indians are familiar with NPS, only 16% invest by making contributions.

Disclaimer: The above content is for informational purposes only, based on the Max Life Retirement Survey.