8 Facts About Retirement Planning You May Not Have Known

Retirement is an important phase in everyone’s life. There are sweeping changes that can overwhelm you if you are not prepared for it.

Before retirement, different aspects of life such as finances, health, time and activities have to be planned for. Most people do not plan for retirement in the right way.

Facts About Retirement Planning

Here are a few facts about retirement planning that are forgotten to be considered in the financial plan

Forget Retirement – Target Financial Freedom

Retirement is not about age. If you have a decent amount to take care of your day to day needs & other goals you can be financially free. I will suggest you read this post – financial freedom tips

Health Insurance Vs Medical Corpus

When you are working, the employer might cover your health insurance needs.

But post-retirement, you have to take care of it yourself. It is more important as you grow older, but tougher to get.

Your insurance need gets rejected or you get it at a high premium. Most times, pre-existing illnesses are not covered or covered only after a few years of the policy being in use.  Buy a comprehensive health insurance product and remember to be consistent about the premiums.

Few people think that they should create a medical corpus & that should be good enough. Not really if you encounter with a serious illness in the early years of your retirement. Medical corpus is required to cover things over & above your insurance.

Work on maintaining your health both physically and mentally so that you can have a peaceful life when you are retired.

Read – Steps of Happy Retirement

Life Insurance is Lottery Ticket after Retirement

When you are an earning member with dependents, it is imperative to have life insurance.

Once you have retired, there are other aspects to look at. If your family members are financially self-sufficient, it is not really required. If you have a huge debt (normally you should retire all your debts before retiring), then a policy may make sense. The proceeds can help to pay off the debt either in full or in part and your family members will not be burdened with it.

If your family depends on your pension (which will stop in case if you are not around), then some amount of life insurance is good. Some of us may have many insurance policies. It is a good idea to consolidate multiple insurance policies and continue with only those that are useful.

If you do not have debt and family members are financially independent, it does not make sense to have life insurance post-retirement. You can use that money elsewhere.

If you have sufficient assets to take care of your retirement need – life insurance is just a lottery ticket for your family members & should be avoided.  

Products in Retirement are Different

When you are young, you invest in different kinds of products like PPF, EPF, Equity, Mutual Funds, Real estate etc. You have many goals and a long future ahead. You want to create wealth, earn income and save taxes.

So you invest in more accumulation oriented products than distribution oriented investment options.

When you are retired, you would want regular income from your investments. You want more liquid assets. Therefore your portfolio should be skewed towards distribution-oriented products. These products include senior citizens savings schemes, lesser real estate & maybe annuity if you are ready to understand the complexities.

Liquidity in your investment products is a must in retirement – it gives a sense of confidence.

Check – Best Retirement Plans in India

Asset Allocation after my retirement

The portfolio composition has to be in tune with the changes in your life. When you are younger and have fewer financial commitments, you can have an aggressive portfolio where the risk-reward ratio is high.

At the same time, you have to invest such that you will have a corpus to fulfill your financial goals like buying a house or ensuring a comfortable retirement. Invest early on so that the money you earned in the form of interest and dividends also gets invested and earns more money.

Due to medical advances, life expectancy is on a rising trend and therefore you have to have a portfolio that provides you with income throughout your retirement years. You need to have equity-oriented investments in your portfolio to beat inflation and build a good corpus.

The equity portion will have to reduce over a period of time as your age increases.  Do you have sufficient assets for retirement & want to leave a large estate for your children? If yes, then you have to invest suitably to get higher returns and more growth. Which means you may want to continue to invest a larger portion of your portfolio in equity-oriented assets.

Ask Yourself – Is 1 Crore Enough for Retirement?

Review of Portfolio

Many people have the same investments at 50 that they had when they were 30 years old. You are most likely to be in different stages of life at 30 and 50 and so your portfolio should suit the stage of life.

Review your portfolio regularly and tweak it to suit your goals and current financial situation.

Regrets in Retirement

Here are some regrets/wishes that people have shared about retirement –

  • I wish I had taken health insurance before. Now I have to buy at very high premiums.
  • I should have continued to work for some more years. I would have earned more and had a sense of purpose in life.
  • I should have planned my retirement better rather than thinking I would work till I am 58.

Must Read – When you are not ready for Retirement?

Goals after Retirement Age

What about a foreign trip or a long cruise to Alaska that you always wanted. What about birthday celebration of your grandchild or gift to a needy in the family or charity to any organization.

So don’t think that you will not require additional money than the day to day expenses.

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Plan your retirement properly. Changes in life keep happening. You have to ensure that you are financially independent in the golden age of your life.

8 COMMENTS

  1. As a “financial planner”, do you review the asset allocation or mutual fund investments each year and make adjustments accordingly?
    Also, your fees mentioned for financial planning, is that paid annually each year? Will it increase in future years?

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