Your Money: Five Tips to Prepare for a Care-Free Retirement Life
If you’re nearing retirement, it’s time to put your finances in place. It is best to plan your finances after retirement well in advance so that there are no unpleasant surprises on your retirement day. The Covid-19 pandemic has shown that changing dynamics can hurt their finances if not well planned. From medical needs to investment planning, there are a multitude of issues that need to be addressed. Here are some weak spots and likely solutions you need to work through to get through the golden years.
Management of the pension corpus
Retirement benefits include provident funds, bonuses and other retirement pension funds. Deploy the funds so that you can survive the non-profit retirement period without having to borrow from friends and relatives.
What you need to do is properly design an asset allocation plan that will get you through the retirement years with a comfortable cash flow. The goal should be to survive on interest income or regular income from capital without having to dip into the corpus. The role of good financial advice therefore becomes important for wealth to continue to grow while providing a steady stream of income for life.
Increased life expectancy
After about thirty years of work, there will be a non-profit period. You need to make arrangements for all of your basic needs to be met for a lifetime. In addition to keeping your finances healthy, mental well-being should also be considered during retirement.
Increase in medical expenses
The Covid-19 pandemic has shaken the financial situation of many people who did not have adequate health insurance coverage. The cost of hospitalization due to the coronavirus can reach several lakhs for a period of 14 days in hospitals. Medical inflation is expected to rise further. Therefore, keep adequate coverage for yourself and your family members to avoid tapping into savings.
Many plans have an upper age limit of 65 for entry, after which one will have very limited options to choose from. Most likely, you will need to purchase a senior health insurance plan with limited functionality. Therefore, those nearing retirement should have adequate coverage and continue to renew their health insurance policies.
Higher insurance premium
The premium for health insurance schemes depends on the age of the policyholder. Those nearing retirement or those who have retired must set aside a larger amount to pay the higher premium. Make sure you get adequate coverage early in life so that over the years the insured bonus continues to add to the total coverage.
Decreasing interest rate
The environment of falling interest rates remains one of the biggest issues for retired investors. With most fixed income investments offering returns of 5-7%, it becomes difficult for many retirees to meet household expenses. And, with inflation still rising, the need to invest in instruments that produce a high inflation-adjusted return will increase. You must judiciously diversify your corpus between fixed income investments such as retirement savings, post, etc., and a part in equity and balanced according to your risk profile.
The author is Executive Vice President and Chief Marketing Officer, Bajaj Capital