retirement plan: why our retirement plan is torn between the desire to be taken care of and the dream of being independent

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For a moment, she struggled to get her bag out of the plane’s overhead compartment. “May I,” I asked. “Thank you, I’m fine,” she replied. The typical Westerner’s response when he’s slightly embarrassed that you caught him looking a bit addicted. “I packed it, didn’t I? she said with a smile. This incident from many years ago has stayed with me.

The independence of the elderly in the western world may surprise us a little from India. The ranger who took us on the bear trail in the national park was 80 years old. I love my job and I’m happy to do it, he remarked. He drove to work every day, made his simple sandwiches for lunch, and had a twinkle in his eye talking about his dead wife. Not once during the three hour walk did he seek sympathy or care from us for his age. He was proud of his physical form and jokingly attributed it to the forest air.

On the other hand, it is distressing, even embarrassing, to see perfectly fit Indian adults using wheelchair assistance to board planes at international terminals. It is a singularly misused privilege. Reasons given include lack of boarding gates, reluctance to walk or take trains to another terminal, inability to follow signs and reach a specific terminal or gate, not knowing the language to ask for help, etc. The rest of the world seems to have solved these problems which only affect Indian seniors who visit their children on board.

Why are we so different in India when it comes to aging? Our cultural context celebrates addiction. We are proud to be together and regularly do chores and chores for each other. We also volunteer to help very easily in situations where we see a need, which is a great quality. We don’t need to be told to reach out or wait to be asked. Being served is something we take in our stride or even expect. The simplest tasks that can be done independently are regularly done by others, for a price we pay voluntarily or as a right.

We love privileges. In our minds, we are still monarchies with kings and a hierarchy. We bend and bow easily to power, love favors, and generously seek and bestow overt respect. Gratitude is a virtue in our society and we expect it for every little favor we have given. Maybe that’s why we’re so angry and upset about retirement planning and retirement homes. Many elders see it as a reprimand or abandonment from their children. Many children feel guilty and inadequate when they have to choose a retirement home for their parents. Adult children are regularly expected to alter their career ambitions to meet the demands of their parents. Parents who receive such preferential treatment wear it as a badge of privilege. Things are changing, some would protest. The changes are visible, but we are caught up in several stages of this transition as a society. The break-up of the joint family system was the first change. Then comes the stage of cohabitation after old age, where children are expected to take care of the elderly by welcoming them into their homes, when the parents have aged or become single.

Then we have elderly parents who live independently, who are cared for by other family members or paid attendants, but who remain dependent on that help for everything from routine tasks to special situations. Then we have those who swear not to be dependent on their children, but live with physical and monetary limitations that linger like a lament. There is only a small minority who think that to be independent to the end, you have to plan for both money and health. Our elderly population is still in these different stages of dependency. This is why retirement planning is torn between the desire to be supported and the dream of being independent.

We still don’t have enough fit, happy seniors whose lifestyle inspires others to let go of their penchant for privilege and dependency. What we have instead are posh retirement colonies where money can buy services. We like to be supported for a fee and view funding our own retirement corpus as an act of independence. Many retirement plans aim to stay in a luxury retirement home.

The problem with this approach is that the market for these services will evolve more quickly by recognizing the weaknesses of the consumer. We already see it in many big cities, where bells and whistles are added to sell a facility, only to disappear within a few years. Exploitative practices arise when buyers of a service operate from a position of weakness. It’s still early to say how the retirement home market will evolve, but I bet it will be designed and priced abusively. Inflated retirement corpora will result.

The network of choices in retirement becomes more complicated with the increase in home ownership. People don’t want to leave the houses they own to live elsewhere. While inheritance disputes still occur, it is also very common for parents and their adult children to buy property for each other. They generally don’t want to sell. They look for solutions keeping life in the house as the base case. We now have several specialized services for these elderly people, from catering services to couriers to carers who care for the disabled. Asymmetric portfolios and costly cash outflows are the results. A friend of mine from Australia once remarked that, given the size of its population, India usually throws people at whatever problem it wants to solve. Our pension plans need more funding because of the choices we seem to make as we age. We remain too far from the Western model of independence. We also don’t miss an opportunity to point out that our culture has so much more to offer than sending people to assisted living facilities like the West.

What we forget is that the West makes its choice very early on, so that children and elders remain responsible for their adult life, in complete autonomy. No one “sends” someone else to an assisted facility. Seniors live alone, financing their retirement through tax-advantaged compulsory savings that are invested in market portfolios. They transition to assisted care with great regret when they become too old or too infirm to live independently.

Our retirement model is too confusing at every step—goal setting, funding, investment strategy, levy, and legacy—because we haven’t answered the fundamental question of our true desire for independence.

(The author is president of the Center for Investment Education and Learning.)


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