Are you going to end your
working years with a big fund, a home and dream of living comfortably? If so,
then Congratulations! But, taking care of your retirement fund in your old age
is not just a financial but also an emotional issue. You cannot ignore either.
Because, old age comes with its share of problems such as diseases, faster than
expected erosion of wealth, children
fighting for financial legacy etc. These can be drain on your finances
too, if you do not have a financial plan in place for your sunset years.
As the retirement year comes
closer, there may be many daunting questions confronting you. First, of course,
is whether your accumulated savings are sufficed to take care of your expenses
in the post-retirement years. Are you
bothering to buy individual health insurance for you and your spouse to ensure
continued financial protection after the employer’s group cover ceased on
retirement? Have you decided where the retirement money would be invested to
ensure your regular income and safety?
And the most importantly, have a Will to ensure that your wealth would
go to the right people after your death? With improved health care facilities
and growing longevity, these important questions are begging to be answered. Also Read :Are you prepared for your “second life?”
Now that you must be get motivated
and thrilled to work on your post-retirement finances.
Let’s explore all these
questions, whose answers may help you plan your retirement finances in a better
way.
Review
your Retirement Corpus Need
It is not so simple to find out
as it was to calculate other financial goals. To arrive at a perfect number for
your ‘retirement corpus’, firstly, you must review many factors and assumptions
as you made. Because, if all the factors deviate a little bit here, the result
can be very different. For instance, what if you had to retire 2 years earlier
than planned, what if your return from your investment were 1-2% lesser than
assumed, what if inflation was also higher by 1-2% than assumed or what if you
live for 5 more years in retirement and finally
what if you are falling short of
target.
If you consider all these small
deviations, suddenly your calculated retirement corpus may go in ‘deficit
danger zone’. In such cases, you will have to make smart and pragmatic thinking
can ease the pressure to an extent.
·
Working
more years
If you are falling short target amount,either or both your spouse can
work for a few more years if your health allows. Nowadays there are multiple avenues
for those who want to continue working after retirement. You can take up
consultation work or go into teaching. You can also start distribution of
financial products like mutual funds and take agency for selling of insurance
products. You may go for other options include blogging and joint social
enterprises such as NGO.
·
Relocate
to smaller towns
If you are living in metros or
Tier-I cities where the cost of living is higher, you can migrate to a smaller
town where living cost is low ensuring easy access to quality health-care
facilities and favorable weather.
·
Increase
Saving Rate and Invest in high-risk instruments
If you have time to reach the
goal, increase the saving rate, if necessary, and invest a part of the funds in
risky instruments such as equity that can generate returns higher than the
inflation rate and shield the corpus from capital gain tax. Finally, if you
have just retired, it would be advisable to choose bank deposits and can
allocate a part of retirement fund in monthly income schemes (MIS) of banks or
post offices. But, do not go for ‘retirement plans’ or ‘pension plans’ in
market. Also Read: How Saving Rate affects Retirement Corpus at different ages?
·
Reverse
Mortgage property
If you have a property or own
home, you can go for reverse mortgage it to a lender where bank, based on the
value of property, will pay you a fixed amount for, say 20 years. Since this
amount is treated as a loan, there is no tax liability. Besides, you and your
spouse can stay in the house till you are alive. Also Read : Reverse Mortgage Loan- a last resort retirement plan!
Plan
for Health Cover
Health could be your biggest
expense after retirement as a lot of money goes towards medical expenses at
your retirement age. So, start making a good health plan for your future too. Buy
each of you an individual cover of Rs 3-5 lakhs and a top-up cover of up to Rs
10 lakh. Many health insurance companies have special plans for senior
citizens. It may be expensive but will be worth it. You must also build an
emergency fund to take care of your medical needs. Eat well, eat healthy, sleep
well and exercise regularly. Also Read: Health Insurance for old age/Senior Citizens
Get
rid of Financial Liabilities
If you retire with huge
liabilities like housing loan, you must pay off the loan with a part of the
retirement fund and take support from your adult children, if they can. You
should also get rid of your life insurance policies as you do not need life
cover, if you don’t have big financial liabilities at this stage. Hence, you
should not invest in any ULIPs fund and other investment insurance products and
abstain from insurance agents.
Conclusion
Retirement is not an easy thing
to plan for and you are surely underestimating retirement needs. Look around
you; see the people who are retiring these days, what are their lives like?
Full of struggle? Are they dependent on someone financially? If you are
struggling financial right now in your life, imagine the days when you will not
be earning and your health will not be as good as it is now.
Nearing
retirement? Think again!
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