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The Golden Opportunity of Golden Years

by

Neeraj Chauhan, CFPcm

13/07/2014 Neeraj Chauhan, CFP

By providing financial protection against the major 19th century risk of dying too soon, life insurance industry became the biggest financial industry of the century

Now

Providing financial protection against the new risk of not dying too soon enough may well become the next century’s major and most profitable financial industry

Peter Drucker

13/07/2014 Neeraj Chauhan, CFP

Most Populous countries 2013

Country Population (in Millions)

China 1,357

India 1,277

United States 316

Indonesia 249

Brazil 196

Pakistan 191

Nigeria 174

Bangladesh 157

Russia 143

Neeraj Chauhan, CFP 13/07/2014

Most Populous countries 2050

Country Population (in Millions)

India 1,652

China 1,314

Nigeria 440

United States 400

Indonesia 366

Pakistan 363

Brazil 227

Bangladesh 202

Congo, Dem. Rep. 182


Emerging retirement income market


By mid-century, this 60+ age group is expected to reach 19% encompass 323 million people, a number greater than the total U.S. population in 2012.


Challenges


Increasing Life Expectancy

57 59 60 62 63 64 66 68 69 75

0

10

20

30

40

50

60

70

80

Age

Age


Significant health problem


Almost one-half (47 percent) of older Indians have at least one

chronic disease such as asthma, angina, arthritis, depression,

hypertension or diabetes


Fewer than 10 percent of Indians have health insurance from private

or public sources, and about 72 percent of health care spending is

paid out-of-pocket


Can’t forecast size of their retirement bucket


Too much life, not enough money as Less

than 11 percent of older Indians have a pension of

any sort


Shift in formal retirement savings plan from defined

benefit to defined contribution


Savings are frequently invested in low interest

bearing Instruments.


Accumulated capital usually end up being

diverted to necessities other than retirement.


Many Indians are heavily reliant on investments in property and are hence very exposed to illiquidity & movements in property values.


Emotional bias

Fear

Aggressiveness

Regret

Susceptibility

Inertia


Nuclear family Structure and inability of families to support

elderly


Low financial literacy


Silver lining


High Savings ratio


Growing Economy


Expectations


Education

Decision Support

Advice/ Marketing info

Healer

Trusted Counselor


Delivery


Retirement planning is smartly shifting purchasing power from period of high earnings (the working years) to those of low earnings (Retirement).


Get real about Goals

Income

Outgo 13/07/2014 Neeraj Chauhan, CFP

Right combination of retirement income tools for both

retirement accumulation

&

retirement distribution.


Appropriate

Asset allocation,

diversification ,

rebalancing.


Adequate Risk

management

•Red Zones

•Health

•Expect the Unexpected


Fiduciary behavior


A plan that alleviate their fear, allowing them to retire with confidence and leisure.


Give an attitude of abundance over scarcity with focus on life time income and spending.


Shift focus and spotlight from

Investment portfolio to human capital with life

cycle approach. Neeraj Chauhan, CFP 13/07/2014

People care more about their lifetime standard of living than about their wealth and this requires a shift from return management to risk management.


In the End

It’s all about Arranging lifetime consumption in the safest way possible given finite lifetime income over building largest possible portfolio constrained by risk tolerance.


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