Tag Archives: retirement planning

10 Things To Do Before You Retire

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Don’t put off today what you can’t afford to do tomorrow. In spite of the world wide pension crisis and a growing acceptance that we must plan and save for our retirement, the harsh reality is we are actually not saving enough. Research reports reveal that only 15% of the individuals are saving sufficiently for their retired life. Here are a few tips on things to do before you retire so that your retired life is more comfortable and enjoyable.

Get Rid of All Your Debts

If you are taking a housing loan, personal loan, car loan or any other loan make sure that you will be repaying them on or before your retirement. You need to choose the term of the loan in accordance with your retirement age. You can enjoy your retired life when you have 100% financial freedom, not when you have to repay your loans.

Protect Your Emergency fund

Emergency expenses can happen any time. But the possibility goes up during the old age. So we need to enhance the emergency reserve year on year based on the inflation and change in your expense levels. Emergency fund will give you a sense of security and also you need not touch your other investments during emergency where you need to pay pre-closure penalty. Also don’t forget to refill the emergency fund once you met an expense out of emergency fund.

Establish a Retirement Budget

You need to visualize your retired life well in advance and need to create a budget for your retirement. That is you will not be going to office. So the expenses on transport and clothes may come down. Also you will have more time to spend. You may need to spend more on leisure travel and health care.

Examine Your Cash Flow

Take a close look at your cash inflow as well as outflow. Is there going to be any income after retirement? Like rent, royalty…. Would there be any unwanted outflow during retired life? Like paying life insurance, or SIP. At times during your beginning of the career , you could have taken a policy where you need to pay premium up to the age of 60. But now you may plan to retire at 55 itself. So you need to realign your existing policy and other investments in sync with your retirement age.

Grow Your Retirement Corpus

Find out how much corpus you need to have when you retire so that you will be having complete financial freedom. A professional financial planner will of great assistance to you in this regard.

Develop a withdrawal strategy

How are you planning to withdraw your cash outflow during retirement from the retirement corpus? Monthly, quarterly, half yearly or annually? Through Sytematic Withdrawal plan in mutual funds or by way of dividend or interest. All these will have a great impact on the corpus you need to accumulate. So you need to decide in advance.

Minimize taxes

Your retirement corpus and retirement income need to be tax efficient. You need to pay taxes as and when the fixed deposits matures irrespective of that you withdraw interest or reinvest under a cumulative option. But you need to pay interest only when you withdraw from the mutual funds. Careful selection of investment vehicle can reduce your tax during the retired life.

Get Sufficient Mediclaim coverage

The moment you retire, your employer will stop covering you under the group mediclaim. So you need to plan for your individual medical cover well in advance. At old age the medical expenses are inevitable. If you have not planned it properly the all your retirement plan will become a mess.

Consider Inflation adjusted annuities

The monthly income you need when you retire is not going to be the same even after 5 years of your retirement. Inflation will increase your retirement expenses year after year. So year after year your retirement income needs to go up.

Oversee estate planning

How your fixed assets and financial assets need to be distributed to your legal heirs? Create a WILL. You can avoid creating relationship problems to your next generation because of your left out wealth.

 

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

The 10 Financial Doctrines of Wise Retirement Planning

http://www.kamyabology.com/pptadmin/98/retirement.jpgLet’s begin on planning finance for retirement:
It is usual for many of us to aspire for a financially secure and happy retired life. However being financially prepared to meet the demands of retired life by saving and investing requires considering and following the 10 doctrines of wise retirement planning.

A look at the 10 doctrines to wise retirement planning:

1) Provide for contingencies
Most of us tend to underestimate our retirement needs. Provision for medical emergencies with inadequacy of medical insurance in old age requires financial provision. Lack of government social security schemes and retirement benefits to self-employed and private sector employees creates requirement for more provision for contingencies after retirement.

2) Think that you will live long:
This is true with increased life expectancy. Now you will have more years of life after retirement. Thanks to medical advancements. So it is better to plan for the additional years and avoid living frugally in old age.

3) Plan that you will retire early:
It is wise to provide for contingencies arising that require you to retire early. You could suffer ill health, lose your job, or need to care for a sick or elderly member of the family. Women may have to opt voluntarily to look after the family needs.  All this requires more savings for retirement needs.

4) Beat the inflation before it beats you:
Inflation affects the personal finance needs of the working class, but pay rises could help them resolve it to a certain extent. However the retired have to save more to reduce the impact of inflation. Investing in modes that give you extra returns could help greatly.
Investors come to me and say “I would like to accumulate 2 crores and retire”. But when we really work out the inflation adjusted retirement corpus, the 2 crores would not be sufficient for him to have comfortable retirement. 2 crores may feed you enough in the first year after your retirement. The returns from the same 2 crores will not be sufficient for you take care of all your needs on the 10th year after your retirement because of the skyrocketing inflation figures.

5) Provision for increased medical expenses after retirement:
Most of us underestimate medical expenses after retirement, with these expenses being inevitable in old age. Hence more provision for medical insurance helps. A consideration of your family’s general health, family history of certain genetic disorders, and the class of hospital you get treated would help in proper estimation for medical insurance.

6) Provide for your spouse and dependents who may outlive you:
It is inevitable that this need should not be overlooked. Your spouse and dependents need to live a secure financial life after your lifetime. Taking up insurance policies during your working life and well thought out retirement planning will take care of your dependents and spouse financially.

7) Realize you need to be vigilant about sources of retirement income:
Sometimes we may be ignorant of benefits on retirement like provident fund, gratuity and other benefits. In India the lack of social security schemes after retirement makes it necessary to invest more in good income generating sources for steady flow of retirement income. The advice of investment consultants, along with financial education and information contributes to good financial standing after retirement.

8 ) Educate yourself about retirement savings plan management:
When the majority is relying on the pension schemes in the form of ulips offered by various public and private insurance companies, as a smart investor you need to understand the hidden charges of these pension policies. These policies are all heavily front loaded.
So you need to evaluate various investment options available for retirement. You need to accumulate sufficient knowledge in this regard. In addition learning to keep track of them with professional help makes these saving plans work for you.
9) Plan for an income for life:
Your retirement plans need to be financial plans to make income last you a lifetime. Pensions or annuities providing best income need to be safeguarded, as withdrawing large sums from them could end you in financial insufficiency in the final years of your life.

10) Take professional investment advice that works:
Many do realize the importance of financial advice from professional financial advisors, but in practice seek it from family, friends and colleagues. A right financial advisor could give you good investment advice to have financially secured retirement ife.

A final note:
I am sure you want to emerge financially secure for your retired life and will follow these 10 financial tenets to wise retirement planning.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.
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