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 for the interest accrued irrespective of that you
withdraw the interest or reinvest under a cumulative option. But you need to
pay income tax 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.
Courtesy : www.govtempdiary.com
