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About to retire? Here are few simple things to follow for your money management

financial planning - RETIREMENT PLANNING

‘Retirement’ is one of the most important stages of life when a person takes a leap into a phase where he is expected to enjoy his hard-earned money, fulfill his/her dreams of traveling, getting together with old friends & also to maintain health, well-being & financial independence!

If we look at new retirees, majority of them retire from serving their respective employer organization for 30-35 long years! Our previous generation have this in common, that they stick to one organization where they started working.

Due to this, they get major amount of ‘retirement corpus’ in the form of Provident fund, gratuity, bonuses, ESOPs in some cases.

The amount, though sizable, there is no pension provided by employers except government & semi government organizations.

When they receive their ‘retirement corpus’ by spending years of efforts, loyalty & hard work, it should be invested in properly so that-

  • They can maintain their ‘financial independence’ for life post-retirement.
  • They can fulfill their wishes
  • They can grow their wealth suitably to beat inflation in the long term
  • Their corpus will have adequate safety, asset allocation & can generate best possible returns.

In a pursuit to achieve all of the above, new retirees get confused with many new investment options, people contacting them with ‘attractive investment offers .

What are those simple things to follow when you retire?

  • Talk about it:

People, about to retire, by their age, they like to keep financial things around their retirement to themselves. They like to discuss on their plans of travelling, spending time with family etc post retirement, but they do hesitate to ‘talk about their finances’ post retirement.

Don’t make it an open book but choose & pick right people in your circle who can guide you & assist you in getting your finances organized. If they can’t, at least they can route you through a right adviser who can give unbiased advice on your finances.

  • Put yourself first:

It is generally assumed that, a person is ‘free from family responsibilities’ like children education, house purchase etc by the time he/she retires.

Well, if it is not so, still ‘put yourself first’.

Upon receiving a corpus, allocate sufficient corpus for you & spouse for financial independence first.

You can plan to give an idea to your children about the retirement & its effect on your cashflows. When you speak freely, they can lead with maturity & can feel more belonged to financial situation at home.

If you have no dependency, then also, allocate enough corpus for your monthly expenses, trips, hobbies. You can surely make nominations to your assets & investments but keep the ownership with you & spouse.

  • Decide on the asset allocation:

If you have a pension to receive which can take care of your full or part amount of monthly expenses, then you can get that support & rest you can invest in for other goals.

If you are totally dependent on your retirement corpus to generate monthly income, to achieve goals like travel & trips, to create wealth over long term to beat inflation, then you need to decide on the suitable asset allocation.

There is no thumb rule for asset allocation, but you should give priority to your needs & goals along with risk appetite. Put suitable % of money for your emergency needs & short term expenses like medical expenses, put other for your monthly expenses needs, then go for your fixed income higher safety investments like post office investment, put the rest in equity & related options for long term wealth creation.

  • Open to understand about new investment options:

There is no age to learn new things! Today, we have multiple new avenues to invest our money in. Some are market linked & some are not. They come with different features. You should be open to learn & understand them.

Sticking to old investment ways can never help you to get the best of everything.

  • Make nominations:

For every investment, assets and insurance policies that you have, you should nominate your spouse first & then children. Nominations are very important. When your spouse is financially dependent on you, its highly important to make him/her as nominee or a joint holder in your investments & assets.

  • Take support of equities:

Equities are better for ling term returns & to beat inflation when you invest thoughtfully.

Generally, a retiree is asked to stay away from equities as it is a ‘risky investment’. Many retirees have limited knowledge of equity as an asset class, so they also tend to follow.

On the other hand, every retiree must understand that, today we face a risk of ‘longevity’ due to advanced medical sciences. Retirement corpus that you receive should last longer till your & your spouse’s life expectancy.

A suitable % allocation should be given to equity in the form of suitable direct stocks & mutual funds so that they earn best possible returns in the long term.

Please note that, before investing, you must understand the basics of the investment option you are investing in, understand the risk level, start with small amount first.

  • Health insurance:

When you are near to your retirement, please check on your health insurance. Check if it provides all the required coverage to your existing deceases, network hospitals near you, % of co pay if any, exclusions etc.

If you have already taken a health insurance at a young age, then its good for you. If you still don’t have any then apply for your spouse.

Always remember, health insurance premium is a cost but it is for your own good!

Life post retirement is important phase of a life! Plan it well..

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