Happy Retired Life Is a Huge Lie

“Retirement is a stage where an employer discards an employee that he cannot exploit further.”

― Mokokoma Mokhonoana

Introduction

We often believe that superannuation would finally set us free forever from the wearisome encumbrances of a career life.  So, when I walked out of my office for the last time on 31.12.2012 after spending nearly forty long years on work, I too thought I was stepping into a life of rest, peace and happiness. But I was unsure I was happy. As Charles Lamb, writes in his essay ‘The Superannuated Man’, “For the first day or two, I felt stunned, overwhelmed… I wandered about, thinking I was happy, and knowing that I was not…”   

After three years in retirement, I realize that the life of a pensioner is not a paradise, as many people often assume. His life is beset with a plethora of troubles. The two major troubles that the Pensioner faces are Money Troubles and Health Troubles. 

Money Troubles of the pensioner mostly arise out of:   

1. Inflation Rates
2. Interest Rates
3. Taxation Rates

His Health Troubles fall under two categories:  

1. Psychological Health
2. Physical Health

This post seeks to briefly discuss these troubles. 

1. Money Troubles of the Pensioner    

The pensioner receives a substantial amount as lump sum payment on retirement by way of Retirement Gratuity, Commutation of Pension and Encashment of Leave. It is assumed that he has also a good sum saved in instruments like the Provident Fund. He invests the lump sum receipts to earn interest to supplement his monthly pension.  People apparently expect this pensioner to simply sit back, relax and enjoy the rest of his life free of all money as well as work related worries. But the real life in retirement is an altogether different kettle of fish. It is often more worrisome than working life.  

The primary worry of the pensioner is related to money. In the best case, his basic pension is half his last basic pay. He is ineligible for any allowances other than Dearness Allowance (DA) aimed at neutralizing the changes in the cost of living. DA is computed based on basic pension. Thus, DA too is halved. While people in service receives annual increments and periodical promotions which regularly raises their basic pays, the pension once determined, remain unchanged until the implementation of the report of the Pay Commission coming once in a decade or more.  Also commutation of pension by which the pensioner surrenders part of his monthly pension for its value in lump sum, substantially reduces the monthly pension. The point is that the income of the pensioner suddenly drops to roughly one third of what he earned while on the job. And the difference keeps increasing. 

Besides the fact of static pension and denial of all allowances other than DA, Inflation Rates, Interest Rates and Income Tax Rates contribute to the progressive reduction of the real value of the income of the pensioner.  Let us see how this happens.

a.   Inflation Rates

Inflation is the result of too much money chasing too few goods resulting in general price rises.  As prices increase, the pensioner needs more money even to retain the existing level of consumption. In theory, the DA based on the official rates of inflation should fully take care of price changes. But in actual practice, this does not happen because of the mismatch between market realities and the official statistics. For instance, the Crude prices have fallen from $150 a barrel to less than $50 a barrel. But for the consumer, the petrol and diesel prices have not fallen correspondingly and the transport fares remain at the levels when crude oil was selling at $150 a barrel. The truth of this situation may not fully reflect in the statistics.

According to official statistics, inflation based on Wholesale Price Index (WPI) stood at (minus) 4.95 per cent, as in the month of Aug 2015. In the same month, inflation based on Consumer Price Index (CPI) was at (plus) 3.66 per cent. In other words, wholesale prices have crashed while consumer prices rose at moderate rates. Then there is another price related statistic called Food Inflation, which has an altogether different dynamics. Most of us do not have the expertise to understand the implications of these complex statistics. But one thing we all know is that prices have always kept moving in the upward direction.   

Because of the mismatch between official statistics and market realities, every installment of DA released leaves a gap between the real price changes and the actual set off provided through DA. Consequently, as time passes, the gap widens and the pensioner is driven more and more into poverty. 

b.   Interest Rates

The pensioner is expected to find his livelihood out of the regular monthly pension and the interest earnings from the lump sum receipts he invests in long-term instruments. Again, the Price Indices based inflation rates hurt the pensioner.

Since inflation rates keep coming down, there is an eternal clamour for interest rate cuts for stimulating economic growth. These rates are controlled by the Reserve Bank of India. The theory is that cheaper loans increase consumer spending and corporate investments. Powerful lobbies like the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII) are behind such demands.  The Governments tacitly and at times openly support it. But every one conveniently overlooks the reality that state-run banks are groaning under the huge burden of ever increasing Non-Performing Assets (NPAs) or bad debts arising out unrecovered loans.  
  

Until the other day, the Governor of the Reserve Bank of India was being portrayed as the enemy of India’s economic progress for his refusal to oblige the rate cut lobby.  In an article published in the Hindu on 18.09.2015, Dr Subramanian Swamy, Professor of economics and former Union Cabinet Minister, wrote, “Incidentally, the Reserve Bank of India (RBI) Governor, Raghuram Rajan, has single-handedly brought a huge slowdown to the Indian manufacturing sector and exports. As a doctor, he believes that best way to bring down the temperature of a patient (i.e. inflation) is to kill him (investment starvation)”.  

On 29 Sep 2015, Dr Raghuram Rajan surprised even the rate cut lobbyists by slashing the policy rates by a whopping 50 basis points. None anticipated a cut exceeding 25 basis points. And it was the fourth rate cut this year. It is strange that the good doctor, who was counselling the nation just ten days earlier to resist the tendency to go for quick fixes citing the example of the economic turmoil in Brazil, suddenly discovered that the economic situation in India is ripe for such a hefty rate cut.  Well…he reportedly said during the press conference, “Everybody and his cousin have a theory on how to run the economy…My name is Raghuram Rajan, I do what I do…” 

The lobbyists are thrilled and Dr Raghuram Rajan apparently gets to keep his job for the time being. After the RBI rate cut, the Union Finance Minister said that the government is planning to reduce the interest rates on Post Office Small Saving Schemes.

When RBI cuts its policy rates, interest rates on deposits too fall. The pity is that none bothers about the hardships of the pensioners/senior citizens whose economic survival is dependent on the interest earnings from the retirement corpuses or household savings they deposit into the banks and Post Offices. As someone recently wrote, “the key question is, why when everyone roots for a rate cut to facilitate easier lending rates, there is not even a whimper of support for those who want at least status quo in deposit rates?”

c.    Income Tax Rates

When it comes to personal taxation, the pensioner is more or less treated on par with the salaried employee. The only concession he enjoys is limited to the extra fifty thousand rupees allowed as non-taxable income in tax computation. Incidentally, pensioners below the age of sixty (like state government pensioners superannuating at the age of 55/56) do not receive even this benefit. And the policy makers expect the pensioner to save Rs.150,000 a year (Rs. 12,500 a month) to obtain the full tax relief available on savings (U/s 80C). The insensitivity of the policy makers do not end with these…

As already discussed, the interest rates have been on a downward slide resulting in the steady fall in the interest income for the pensioner. When the RBI Governor was asked about the adverse impact of frequent rate cuts on the returns on the investments of the pensioners and domestic small savers, he replied saying that with inflation at 6 or 5.5 per cent, if the fixed deposits earn 8% interest, the investor gets a real return of 2 to 2.5 per cent. What he and other votaries of rate cuts do not mention is that when tax on the interest income is considered, the return often falls below the erosion in the value of money because of inflation.

For example, consider an interest rate of 8 per cent p.a. on a 10-year fixed deposit of Rs. 5 lakh. The interest earnings in this case would be as follows:

Tax Slab  (%)	FD  Amount (INR)	Interest Income (INR)	Tax on Interest (INR)	Net Income (INR)	Post-Tax Earning (%)
10	500000	40000	4120	35880	7.18
20	500000	40000	8240	31760	6.35
30	500000	40000	12360	27640	5.53

Hardly anyone ever speaks about post-tax interest income. Incidentally, Dr. Subramanian Swamy asks the rhetorical question. “Why have household savings, which were the bulk of national domestic savings, dropped from a high of 34% of GDP in 2005 to 28% GDP in 2015?”  

Perhaps, the answer is obvious.  Because of the low post tax earnings from simple and safe saving instruments, people are forced to gamble with their hard earned money by entrusting it with fraudulent firms offering sky-high returns or investing it in speculative instruments like company stocks hoping to become billionaires overnight. Incidentally, on Monday, August 24, 2015, the BSE Sensex fell by 1,624.51 points and NSE Nifty index lost 490.95 points. The investors lost nearly seven lakh crore rupees in the crashes. And we do not know how much is being swindled by fly-by-night financial firms.  

If you are a pensioner enjoying post-retirement healthcare provided by your former employer, then you would be surprised how your tax liability increases while nothing is added to your real income. Whatever actual medical reimbursement you receive (beyond Rs.15,000 a year) is treated as taxable income.  The problem here is that when you add up incomes from your monthly pension, interest earnings, medical reimbursements etc., the rate at which you would pay income tax might climb to the 20 or even 30 per cent levels. 

It is difficult to understand or appreciate the logic behind the manner in which pensioners are being taxed. Any sensitive government that has concern for the increasingly distressing situation of the senior citizens/pensioners would be more realistic and sympathetic about taxing them. The irony is that the government that ignores the pitiable circumstances of the pensioner has no compunctions about proposing the reduction in corporate tax from 30% to 25% under the pretext of incentivising economic growth.  We may shout from rooftops that we are the fastest growing economy in the world.  But the sad reality always remained that while the rich become richer, the poor become poorer.  

2. Health Troubles of the Pensioner  

There is joke about a young college girl introducing her grandfather to her friends. “He is in his nineties“, she said. The old man reacted with a seductive grin on his wizened face, “Only in my early nineties”. The moral is that it is killing for people to accept the reality of ageing. 

Old age is often portrayed as a time of rest and reflection. It is also considered an opportunity to do things that were put off while raising families and pursuing careers. Sadly, the process of ageing is not always idyllic as often imagined. There is real pain and anguish in the process of moving from a healthy and active person to a sick and sodden one.

Ageing related health troubles of the pensioner have at least two dimensions –psychological and physical.  

a.   Psychological Health

Retirement can be emotionally devastating. It is often a shattering experience for many and more so for people retiring from senior positions. Until yesterday, they were symbols of power, charisma and prestige.  They sat behind massive desks in their swanky offices. They were surrounded by an army of people and all the paraphernalia of authority. Their signatures decided the fate of people and projects. Their orders saved or snuffed out lives, released or blocked billions on war or on peace, ruined or protected lives and livelihoods of many.  They basked in the glory of public and media attention. The sudden and eternal loss of all these through retirement could badly break them mentally. Many people become melancholic after retirement and might even go through a period of grieving over their lost forever losses.

Although most employees look forward to retirement, the sudden changes arising out of the exit from a career life can be unexpectedly traumatic. As someone rightly said, “work is not simply about trading labour for dollars”. Work is the means by which individuals discover their own individual identity and fulfillment. It is also a means by which others identify us. The sudden loss of identity and esteem is often emotionally devastating. 

As the pensioner ages, he would also sense a loss of control over his life due to physical changes and financial and other pressures.  Prolonged sufferings arising out of serious and chronic illnesses, kids leaving home, painful losses of loved ones and friends, and the awareness of the close proximity of death, often lead to negative emotions like sadness, anxiety and overwhelming sense loneliness and of being forsaken by all. These are all what psychologists often term as ‘life-change’ issues. Life-change issues often take a heavy toll on the ageing individual’s emotional well being. 

b.   Physical Health  

Comparing himself to a car, an old man joked, “Almost every time I sneeze, cough or sputter: either my radiator leaks or my exhaust backfires”. For most people, physical changes related to ageing are very embarrassing and hard to accept. Few have the capability and inclination to age gracefully. Most try to camouflage the external signs of ageing like greying hair, wrinkling skin, sagging bosoms and bulging waistlines through costly restorative procedures. But none would succeed in hiding for long, the signs of the steady and unstoppable decline of their bodies as they age. The creaky joints, the shivering limbs, the flaking skin, the failing faculties, the unceasing pains are all changes that none can wish away or conceal for long. As time passes, we realize that everything hurts, and what does not hurt; does not work.

I often think that every component in the human body has an expiry date stamped on it. Each component starts faltering as it approaches its expiry date. Modern medical science could carry out some recalibrations, repairs and even replacements if one has the capacity to bankroll the huge costs involved. But all restorations would only be temporary since the originals are always the best.  In due course, these components would start breaking down…  

Eventually matters worsen. The pensioner starts spending more time in hospitals than outside it. He struggles to find the resources to support such frequent and long duration hospitalizations. In a world of mammoth ambitions and merciless competitions, the pensioner would be foolish to bank on his children or others to support him physically or financially at this stage.  If he is a central government pensioner receiving a pathetic sum of Rs.500/- a month as medical allowance, he is doomed for sure. However, if he has a post-retirement health care facility provided by either his ex-employer or a health insurance company, there is some hope and comfort. 

Finally, the health situation of patient takes a turn for the worst. The hospital knows that the man simply cannot be saved.  Yet, it would keep him in the sterile environment of its Critical Care Unit attached to a maze of tubes inserted into every imaginable spot in his body.  The hospital would continue drawing samples of all kinds of body fluids for costly lab tests. Everyone concerned knows that once the tubes and wires are pulled out, the person would be a corpse. But the commercial interests of the hospitals keep him alive just for the records.  The hospital bills keep mounting. The family starts selling everything saleable to fund the treatment.  Then it borrows and might later beg or even steal…

At last, the hospital realizes the dangers of artfully postponing the death of the patient. It decides to disconnect the masks and machineries to release the pensioner to death. The sad part of all these is that many would make the final exit “Sans teeth, sans eyes, sans taste, sans everything”, leaving their families bankrupt.

Conclusion

The pensioner has economic issues. He survives on a fraction what he was earning while on his job. The real worth of this income keeps falling because of inflation not neutralized through DA.  Added to these is the progressive decrease in his income from his investments because of interest rate cuts under the pretext of falling inflation. Amid all these adversities, his expenses keep mounting because of his deteriorating health and the increasing dependence on others for tasks he once carried out on his own... 

So, if you are still an employee, my advice is to be careful with your money and always keep a part of your salary aside as long term savings. Else, you would live in regret after retirement and die in penury.  If you are a pensioner, well… your fate is already sealed... 

Retirement and ageing are life-changing experiences. Such changes are inevitable.  It is easy to be drowned in the thoughts of the miseries of it. But it is necessary to be realistic about it. One has to anticipate and prepare for the inescapable changes that lie beyond retirement. Getting depressed or anxious could only add to the sufferings.  

“The only way to avoid being miserable [in retirement] is not to have enough leisure to wonder whether you are happy or not”, said George Bernard Shaw.  I agree. The average person has roughly 15-20 years to live after retirement. This must be time enough to write a masterpiece, run a marathon, or mentor a contingent of youngsters.  So keep yourself busy. Remain productive even when you are out of your formal career.

Remember that not everything is negative about old age and retirement. There is at least one positive aspect to ageing. The aged have Wisdom. They have seen more of life and its trials and tribulations, dealt with more people and learned to see through them quickly, encountered diverse problems and discovered the means of tackling them, made mistakes and learnt lessons from it… They possess that extra insight missing in younger people. It is precious. The family can benefit from it. The society can benefit from it. So go ahead and devise strategies to use your experience to benefit others…  

And finally, let us all remind ourselves that today might be our last day on this earth. And today might be our final window to stamp our footprints on the sands of time. Tomorrow might be too late. For tomorrow, we might be ashes flying in the air or floating on the waters, or corpses lying eternally buried in a graveyard…  

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P.S.   Click Here for more articles by the author.

1.The pensioner I have in mind is an incorruptible and thrifty one belonging to the government/public sector. Also my pensioner is a honest Income Tax payer.

2. Male pronouns (he/his etc.) used for the convenience of narration are meant to cover both genders.