Five Factors To Keep In Mind While Planning Post-Retirement Life – NDTV Profit

Five Factors To Keep In Mind While Planning Post-Retirement Life

A periodic review of your financial position as well as portfolio will help you a great deal

One of the keys to living a happy life after working for years is having a solid retirement plan in place. Since a person doesn’t have the same steady flow of income in the form of his/her salary after retirement, a proper analysis of future expenses based on which an individual can prepare the financial cushion s/he needs, helps a great deal. It also depends on the time you start thinking about your retirement plans and goals. Not to forget while you save money, you have to invest as well for your savings to grow.

Here are some of the important factors to keep in mind while you plan finances for your life after retirement.

Age and expected retirement

Two very important factors that determine your retirement plan are your current age and expected age of retirement. The more time you have between today and your retirement, the more effectively you can plan your portfolio and the more risk you can take. You can afford to invest in riskier assets such as stocks if you have, for example, 30 years to your retirement. And here’s another very crucial bit. Since we are planning for our future, we should take into account the anticipated inflation. Experts say an inflation rate as small as 3 per cent could erode the value of your savings by 50% over 24 hours. 

Cut down unnecessary expenses

You plan any investment, cutting down unnecessary expenses is the most basic factor to keep in mind. Not only is it important to start planning for your post-retirement life early but also minimise avoidable expenses. Some of these expenses may include your weekly spending on entertainment, shopping, dining out and even foreign trips. Not that you have to give up on all of these completely. Just plan properly with an eye on the future. 

Assess your financial position and identify retirement income sources

We can’t really plan anything unless we know where we stand today and therefore a thorough analysis of our current financial position is what we need to do as the first step. The next step involves identifying the sources of income to finance the post-retirement lifestyle. The sources may include pension, social security, part-time work and savings. Remember to calculate the after-tax benefits from each source and the time you want to utilise them. 

Determine spending needs

While many expect their post-retirement annual expenses to be 70-80 per cent of what they spent when they were working, experts say that’s often proven to be unrealistic, especially if there are some pre-retirement expenses to be taken care of, or if there’s a health emergency. We often forget that we spend quite a lot of money in the first few years of retirement and therefore experts also suggest that we anticipate our spending needs close to 100 per cent.

Monitor retirement assets periodically

A periodic review of your financial position as well as the portfolio will help you a great deal. Experts also say a portfolio withdrawal rate may also be calculated. By doing so, you can determine if you have enough assets to take care of your post-retirement expenses. If you don’t have enough cushion, you may have to pick some part-time work to maintain the same standard of living. The review will also help you discover if there’s any improper allocation of assets.