he life after retirement must be planned with utmost caution. Although there could be an absence of a regular income stream post retirement, the expenses do not stop being incurred. Instead, there could be a bit more of expenses with respect to the medical and healthcare spending. And we are not among the countries where the state provides social security to senior citizen. Hence, it is imperative for anyone to preplan the investments accordingly to live a financially stress-free post retirement life. The following things must be considered and followed to plan for one’s retirement planning.
- Start investments early: The life after retirement could be as long as 15-25 years. Also, one must ensure the financial security of their spouse alongside themselves. So, in order to sufficiently fund for such a long time, investing early is quite important. This ensures that one has enough time to build the corpus and benefit from the effect of compounding.
- Choose schemes with added benefits: To encourage the habit of retirement planning, the government has introduced different schemes. Schemes like Senior Citizen Savings Scheme, Public Provident Fund, National Pension Scheme benefits the investors with tax rebate as well. Investing in these schemes qualifies one to claim for deductions from taxable income.
- Account for Inflation: Inflation can play a pessimistic role against one’s years-long savings. For instance, suppose the scheme that an investor has chosen gives a return of 8.0% p.a. If the long-term rate of inflation is 5.0%, then the investor is left with meagre returns of 3.0%. When the investment is made in a taxable option, sometimes the returns fail to beat inflation. So, accounting for the inflation factor would be important in planning the retirement.
- Allocate Relevant Assets: There are multiple instruments available in the market for the investors to build a corpus over time. Each of them generates different returns and carry corresponding risks. Equity assets are volatile, but provide better returns over time. On the other hand, the debt instruments are considered low-risk. Hence, an investor can opt for high-risk equities at the beginning stage of their career i.e., at a young age. As the years pass, they can shift their allocations towards risk free categories. Moreover, it is important that one’s investment portfolio is diversified at a given point of time.
- Clear the debts outstanding: We are quite aware that the retirement life may not guarantee a steady avenue of income. Ergo, it is advisable that the financial burden of debt and other payments are cleared before the retirement. This will ensure that the other expenses are not compensated in life after retirement.
- Health Insurance Cover: Like many other schemes, the health cover is also overlooked by the people at a younger age. However, we tend to forget that the insurance premium is lower when one is young, while it is higher at older ages. The health insurance also acts as a contingency for the emergency requirement.