Over the past two decades, defence personnel have experienced two major shifts: their salaries and surplus income have increased significantly with every new pay commission, and their post-retirement lifestyle aspirations have grown beyond what those pay increments can support.

Traditional low-risk, low-return savings options, such as DSOP funds, no longer suffice to sustain the desired lifestyle after retirement. Meanwhile, retirement periods are extending due to longer life expectancy and earlier retirements, alongside rising living costs in urban centers fueled by inflation. These changes demand a fresh evaluation of retirement planning.

Looking at this, one thing is sure: what worked for people in the defence services in the past, with respect to their earnings, savings and investments, will not work in the future. The answer lies in reviewing, reassessing, and replanning critical financial goals, such as retirement or children’s education.

This is why goal-based investing becomes so important. It is the difference between ad hoc investing and building a dependable, inflation-beating long-term investment corpus. This approach can strongly align our defence personnel with their aspirations to provide the best for their families and themselves, bringing structure and direction to their financial lives.

Channeling Investable Surplus

Defence personnel have predictable income streams, making them suitable for being disciplined and consistent in their investment approach. Each pay commission creates a higher investable surplus, which can be channeled to fast-track existing goals or create new ones. When this surplus is directed towards financial goals, such as a child’s education or a retirement corpus, there is greater clarity and purpose to investing.

Long Accumulation Period

With careers spanning nearly 30 years and retirement due around mid-fifties, defence personnel have a long window to accumulate wealth. Investments through systematic investment plans (SIPs) benefit immensely from early starts, giving compounding enough time to work its magic. Modest investments made consistently over a few years can accumulate into a substantial financial corpus. Imagine investing just Rs. 30,000 per month can create a corpus of almost 7 crores over a 25-year investment period. (assuming a 14% annualised return)

Long Post-Retirement Life

The post-retirement period can last up to 25 to 30 years due to higher life expectancy and sometimes shorter career spans. While a pension covers essential living expenses, lifestyle goals like travel, home upgrades, or children’s education require an additional corpus. Add to that, inflation continues to push the cost of living, eroding the value of savings over time. To counter this, an investment plan that aims to achieve inflation-beating returns can make the post-retirement life comfortable and financially fulfilling.

Strong Savings Culture

Defence households are disciplined savers. Yet much of their savings finds its way into low-return avenues like fixed deposits or higher allocation to DSOP. Though safe, these options rarely keep pace with inflation. Moving from savings to smart investing is key to financial freedom. Goal-based investing ensures that investments are channelled into suitable products based on goals, time horizon, and risk tolerance, resulting in successful investment outcomes.

Avoiding Mis-Selling and Ad-hoc investing

Without a plan, investments are often random and not goal-focused. Ideally, investments should mirror long-term goals. This reduces the chances of getting swayed by products that promise quick or unrealistic returns. When the purpose of investing is defined by clear objectives rather than excitement or impulse, decisions become rational, measured, and less likely to lead to mis-selling.

Overcoming Geographical Distance

One of the things about goal-based investing is that it doesn’t get disrupted by frequent relocations or postings, which are a regular feature of a defence personnel’s career. Today’s tech-based remote investing platforms ensure uninterrupted financial guidance, making investing purpose-led and consistent. Whether you’re in Ladakh or Vishakhapatnam, you can track goal progress and also review your portfolio regularly with the help of an investment expert.

Finally, for defence personnel, financial life after service should be a reward. Their careers are built on clarity of purpose, and so should their financial lives. Goal-based investing brings consistency, discipline and direction, transforming your investments into a tool for financial freedom.

(This article is authored by Mr. Harsh Gahlaut, Co-founder & CEO, FinEdge)