It takes a lot of discipline and planning through your life to enjoy golden days of retirement. However, people often tend to delay the process of planning for retirement, thinking they will have enough time to save up. While opinion on the amount of money required varies, 70% of the pre-retirement monthly income is what experts recommend to keep for your financial needs every month.
Let’s look at five ways in which you can live a good life with limited financial resources after retirement.
-
Make Sure Your Debts Are Cleared Off
Debts are an additional burden post retirement. Your Car Loan, Home Loan, Business Loan or Credit Card dues can easily eat into your savings for post-retirement. Make sure your debts are cleared off well in advance before you start planning your retirement.
-
Continue Working
Once you retire, your income options become limited. If you haven’t been able to save enough by the end of your service life, you can delay your retirement and continue working for a few more years to keep the income flowing. You can always cut down on luxury spending, but make sure you save up enough to not compromise with things like Health Insurance, Life Insurance etc.
-
Smart Budgeting Can Help
Budgeting can help you cut cost by ensuring you spend within your means. You must list out the essentials such as food and other regular home expenses and the non-essentials such as club bill, entertainment expenses etc.
Make a note of all the expenses in a spreadsheet and analyse your spending habit. Allocate the fund you have in hand every month among the expenses that are essential. You can consider cutting down on the non-essential items.
Allocate a portion of your fund for the latter years as your expenses might shoot up in future due to medical requirements.
-
Keep Strict Watch On Inflation
Even if you have a big corpus in your account at the time of retirement, inflation would be eroding its value over time. For example, you might find a corpus of Rs. 2 crore to be sufficient at the time of your retirement when inflation is going at 6% p.a. but its value would be reduced with inflation increasing to 8% p.a. To stay ahead of inflation, always keep your money in appropriate investment instruments and if need be, switch assets from time to time.
-
Use Available Financial Instruments To Raise Fund
Despite pre-planning, you might fall short of fund for retirement. You might have to resort to other available resources to arrange for the fund you require. You can use your home to raise money through reverse mortgage loan (RML). Under the reverse mortgage loan, you can get lump sum fund or a regular income for the rest of your life. In case the borrower passes away, the legal heir can either repay the debt or the lender can sell the property for recovering the due. Usually, lenders allow RML of around 60% of the market value of the property. Other options that you can explore would include taking up a part-time or freelancing job.
Other than taking these measures, make sure you have a contingency fund in place to avoid any scarcity due to unforeseen circumstances.
(The writer is CEO, BankBazaar.com)