Retirement Planning: Five tips to prepare for a worry-free retired life

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Always evaluate a fund in the context of overall portfolio, with respect to the diversification it offers in terms of investment style (growth/value/blend), exposure to different market cap segments (large /mid/small-caps), and geography (domestic/international markets)

You need to diversify your corpus judiciously across fixed-income investments such as senior citizen saving scheme, post office schemes etc., and a portion into equity and balanced funds depending on your risk profile.

If you are nearing retirement, it’s time to get your finances in place. It is better to plan your post-retirement finances well in advance so that there are no nasty surprises on the day you actually retire. The Covid-19 pandemic has shown that changing dynamics can play a spoilsport to one’s finances unless planned well. From medical needs to investment planning, there are a host of issues that one needs to take care of. Here are some pain points and probable solutions that you need to address in order to sail through the golden years.

Handling retirement corpus
Retirement benefit includes provident fund, gratuity, and other superannuation funds. Deploy the funds in a way that you are able to survive through the non-earning retirement period without having to borrow from friends and relatives.

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What you need to do is to properly devise an asset allocation plan that will see you through the retired years with a comfortable cash flow. The objective should be to survive on interest income or a regular income out of the capital without having to dip into the corpus. The role of the right financial advice, therefore, becomes important so that the wealth keeps growing even while providing a stream of regular income for lifetime.

Increasing life expectancy
After working for around 30 years, there will be a non-earning period. You need to make provisions so that all your basic needs are met for a lifetime. Besides keeping your finances in good shape, mental well-being also needs attention during retirement.

Rising medical expenses
The Covid-19 pandemic has dented the financial position of many who did not have adequate health insurance coverage. The cost of hospitalisation owing to coronavirus may run into several lakhs for a 14 -day stay period in hospitals. Medical inflation is expected to further go up. Therefore, keep adequate coverage for self and family members so as to avoid dipping into the savings.

Many plans have an upper age limit of 65 years for entry, post which one will have very limited options to choose from. Most likely, one will have to buy a senior citizen health insurance plan that comes with restricted features. Therefore, those nearing retirement should get adequate coverage and keep renewing the health insurance policy.

How much Rs 2 crore term insurance plan will cost you

Term insurance plans are low-cost, high-cover plans to provide life protection.

Higher insurance premium
The premium of health insurance plans depends on the age of the policyholder. Those nearing retirement or those who have retired need to set aside a higher amount for paying the higher premium. Make sure to get adequate coverage early in life so that over the years the bonus sum insured keeps adding on to the total coverage.
Falling interest rate

The falling interest rate environment remains one of the biggest pain points for retired investors. With most fixed-income investments providing returns of 5-7%, meeting household expenses is becoming difficult for many retirees. And, with inflation still going up, the need to invest in instruments that yield high inflation-adjusted return will increase. You need to diversify your corpus judiciously across fixed-income investments such as senior citizen saving scheme, post office schemes etc., and a portion into equity and balanced funds depending on your risk profile.

The writer is EVP & chief marketing officer, Bajaj Capital


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