Worried Of Being Broke During Retirement? Here’s What You Can Do To Prevent It...
Apr 01, 2019

Author: Aditi Murkute

(Image source: freepik.com)

Retirement is an inevitable phase of life. Income stops or reduces drastically post-retirement, but expenditures continue till demise. Post-retirement years are unpredictable as things can change overnight and an extended retirement period can drain your savings. Going broke during retirement is the biggest fear, followed by the regret of not taking the necessary steps at the right time.

In fact, the two prime concerns of people who have retired and/or on the brink of retirement are rapid inflation and the increase in life expectancy.

When people had shorter lifespans, there were fewer options of lifestyles, entertainment, and even lesser aspirations with substantial income. So, the necessity to plan for one's retirement years was quite non-existent.

With changing times, incomes and purchasing power have increased parallel to inflating costs, growing aspirations, and the increase in life-span. However, most investors still ignore factoring in their retirement as a financial goal during their youth only to realise what a gross mistake this is when they cross a particular age band.

Do you recall my cousin Ankush's story?

Ankush was of the same view, until he saw what he could gain if he started early.

If you take steps in a right direction well in advance, you will be able to address the risk head-on and avoid "going broke" for as long as you live.

Financial Planning can help set your retirement life or second life in order. And if you take a planned approach to achieve financial success, it gives you independence even in your non-earning years.

However, before you start investing towards your retirement, you should be aware of the following points:

Assess your risk profile (knowing your risk appetite and risk ability)

  • Decide the time of your retirement (early or later)

  • Determine the retirement corpus for your survival to maintain your current lifestyle during retirement

  • Follow an optimum asset allocation strategy that will help you invest for your retirement (based on the above three points)

  • Determine your current assets and liabilities

  • Choose a suitable Insurance Policy

  • Build contingency reserves

  • Track the current inflation

  • Calculate the number of years you have in hand to build your retirement corpus while you are working.

Where should you invest for retirement?

As mentioned earlier saving and investing for your retirement is imperative. And choosing the right asset class mix will help in building your desired retirement corpus.

There are various investment options available and each of them has a risk associated with it. So, assess your risk profile before investing.

Mutual funds give you an opportunity to invest across asset classes and mitigate the risk with proper diversification to suit your risk profile.

Equity as an asset class has the ability to counter inflation and provide better returns over a longer time horizon. Equities are volatile and the riskiest investment. By taking exposure in equities through equity mutual fund schemes, the risk and volatility of this asset class is reduced to a considerable extent.

Debt as an asset class is safe as compared to equity and provides one's portfolio stability with emphasis on generating a regular income stream. Debt investment isn't risk-free, so the category of debt-oriented mutual funds can be of immense help because it diversifies the risk and provides regular income.

Depending on the overall risk profile of an individual, the portfolio can be strategically created to give the best of both asset classes based on the time horizon of the goals. So, choose a mutual fund category depending on your risk appetite and time horizon.

In my view, the most suitable approach would be to start planning for your retirement right now! When you do, the time-value of money and the power of compounding will help you accrue the desired retirement corpus.

I hope you too are on the ball with your retirement planning. Remember, the early bird gets a bigger worm. If you haven't started yet, begin now.

Better late than never.

So, start today!

PS: If you want to retire rich and live blissfully, don't miss out on PersonalFN's Retire Rich service. This is a new and exclusive service with the sole intent of securing your retirement.

You will even gain the benefit of investing in Top 5 funds along with a DIY (Do It Yourself) retirement solution, where you can start planning for your retirement and potentially build a substantial corpus that could sustain you in the golden years of your life.

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