Planning your retirement is one of the key decisions in your life as it entails a lot of commitment in terms of money, energy and planning. India is gradually moving out of the situation where parents depended on their children during their sunset years. Like the West, Indians are becoming increasingly self-reliant and hence have started planning seriously for their post retirement life. Here are 8 steps to ensure a peaceful and comfortable retired life for you..
Make a sketch of your retired life
This is a fairly elaborate decision and has many nuances. Consider the following. How much money you need and planning for it is just one part of it. How are you going to keep yourself mentally and emotionally engaged post retirement? More often than not, retirement leaves you with a feeling of emptiness as your identity, in a way, goes away with your job. Are you going to continue to work or consult post retirement? How are you going to take care of your spouse and how do you plan to have a good life after your retirement; including social gatherings, travel, community service etc. A very important decision is whether you want to continue to live in your current location or whether you want to shift to more salubrious locations like a rustic environment or to the hills.
Find a financial advisor you can repose faith on
It is often said that 80% of retirement planning is all about money and that is bang on target. With longer life spans due to better medical facilities, it is very likely that your post retirement life will be as long as the working career. That means you need to be financially prepared for it. The process starts with identifying a good financial advisor. What should you look for in your financial advisor? You need a person of honesty and integrity who can transparently tell you the risks and rewards of retirement planning. You surely do not want a slick salesman who promises you the moon. Rather look for a conservative advisor who is willing to put your interest on top.
Determine your return requirements
Well, to continue to earn money after you retire you need to invest and these investments must work hard for you. Be conservative when it comes to your return requirement. Don’t plan your expenses assuming that equities will continue to generate 25% returns annually. There are going to be bad decisions, bad markets and sheer bad luck. Don’t plan an extravagant post-retired life based on some fanciful expectations of investment returns. Prioritize your needs post retirement and plan accordingly.
Profile your risk tolerance
This is a key decision to ensure that you have a comfortable retirement. You have different risk tolerance at different stages of your life. Your tolerance for equities is much higher at 25 than at 45. It would be naïve to have an all-debt portfolio at 25 or an all-equity portfolio at 45. Risk not only shifts with changing age but also with changing circumstances and changing market conditions. That is where a competent advisor can make a big difference
Create a plan for regular and lump-sum outflows
The next step, obviously, is to create a detailed plan for your retirement. This not only includes your regular income requirements but also your lump-sum requirements. Your retirement plan should ideally be a mix of bulk receipts and annuity receipts. The annuity receipts are to meet your regular and routine expenses. The secret of retirement plan is to ensure that the annuities continue to be generated by your bulk investments without depleting your corpus.
Create an emergency nest egg
This is perhaps the most important step. You surely do not want to be surprised after your retirement by sudden expenses. It could be a life threatening disease, it could be a disability or it could be a family commitment that you have to contribute to. You certainly do not have any control over such events. The best you can do is to create a small emergency fund that you can fall back upon in the worst of times. This is also important because there are a lot of goals along the way and retirement is only one of them. You need to ensure that even if you are not around, your family’s dreams and aspirations do not get stifled.
Ensure that you and your spouse are self-reliant post retirement
The big shift after the rise of nuclear families is that people are increasingly becoming self-dependent. Parents and children prefer their own space and the trend is more towards parents living independently post retirement. From a long term point of view it is always desirable that you and your spouse continue to be independent post retirement. Your financial planning, your property planning and your expense planning need to take care of that.
Take care of your health; either ways
Taking care of your health post retirement has two major implications. Remember, after the age of 60 you are biologically inclined to have a lot more health related worries. Focus on your diet and your fitness regime a lot more post retirement. The natural tendency when you have a lot of free time is to take things easy and relax. A good diet and fitness regimen is not only physically but even mentally and psychologically desirable for you. The second aspect is of adequate health insurance. Medical costs are soaring through the roof and you need to plan for it adequately. There are certain special kinds of ailment for which you must look at add-on covers. Never ignore this aspect!
You can ensure a peaceful and comfortable retirement by taking care of some basics. Of course, handling the money part lies at the core of it!
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