Financial Moves You Should Make A Few Years Before Retirement

By | December 22, 2016

Financial Moves You Should Make A Few Years Before Retirement

‘Retirement only means that it is time for a new adventure’. This statement certainly makes retirement sound like a dream come true, right? Well, you can certainly live that dream if your retirement planning is in place. If you are almost on the verge of retiring then we certainly hope that you have your finances sorted. Do away with or minimise any Credit Card or Loan dues you may have before you decide to call it a day. Read on to know more about some simple but essential financial moves to secure yourself post retirement.

Analyse and find out if you are financially prepared to retire

Do a thorough analysis of your finances. You need to determine if you are financially ready to comfortably live a retired life. Based on your analysis, you can modify your retirement strategies and goals. Here are a few things you will need to do to figure out where you stand financially:

  • Balance details of all your bank accounts
  • Your return on investment on all your current investment schemes
  • Your current income
  • Income Tax that you pay
  • The income and expenses that you will incur up to the point of your retirement.

Conducting a thorough analysis of this will help you realise if you are on track with your retirement savings or if you need to contribute more to your retirement fund. If your savings don’t look particularly rosy, you may need to implement a few changes over the years leading up to your retirement. You could get a second job, do some freelance work, cut down daily expenses (dine-outs, movies and other similar expenses can be reduced) or even increase the amount that you add to your retirement fund annually.

Additional Reading: Retirement Planning For Everyone

Figure out your post-retirement budget

Now that you know where you stand with regard to your retirement savings, you can chalk out a retirement budget as well. Take into consideration inflation rates, goals, and expectations. Many of your expenses will automatically reduce post-retirement. Commuting costs like public transport or fuel for your car, shopping for formal wear and other things like these will be off your list of expenses. So, remember to include this amount that you won’t be spending when drawing up your budget. However, don’t forget about all the free time that you will have post-retirement which may lead you to spend more on the things you like.

So, while chalking out your post-retirement budget, list out all your expenses, especially the necessary ones like utility bills, rent, Home Loan EMIs, groceries, personal care, etc. Then write down all the expenses that you will no longer incur since you won’t have to go to work anymore. Once you have this is place, think of the things that you plan on indulging in post-retirement. Whether it’s a hobby, a club membership, travelling around the world, or buying a recreational vehicle, make sure you write down these costs. Now that you have all the numbers written down, retirement will seem more of a reality and yes, you will most certainly start working harder on saving more every month by cutting down on all unnecessary expenses.

Additional Reading: Start Your Retirement Planning Today!

Diversify and improve your portfolio

Irrespective of how long ago you started your retirement planning, it’s time to reassess your portfolio. Of course, you may already have invested in Savings Schemes with high returns on investment.  However, reassessment is a must. We must add that, while reassessing, don’t go overboard with investing in schemes with a high return on investment since many of these schemes also come with a high level of risk. So, your asset allocation model should be diverse: it should include a blend of investments with varying levels of risk. You can seek advice from your financial advisor so that she/he can come up with a plan that will help you achieve your financial goals faster. One of the most important things at this stage in life is to minimise risks and maximise returns. And this is exactly why you need to diversify your portfolio.

Based on the above post-retirement budget, you can improve your retirement portfolio. Your post-retirement budget will help you figure out if your current retirement portfolio will be sufficient to lead the retired life that you want. If you are lagging behind with your financial goals, this is the time to speed up. So, go on and diversify already!

Additional Reading: What Are The Best Ways To Invest After Retirement?

Check the fine print

This is one of the most important things that you have to do before you retire. It will certainly be in your best interest to check the fine print on your tax-benefit plans, Employee Provident Fund, pension plan and other savings schemes that you have invested in. Why is reading the fine print so important, you ask? Well, while investing in one of these schemes, you may have missed out on some vital information. What if the fine print mentions that your heir/spouse will not be entitled to claim any benefits? It’s minute details like these that could affect your family once you retire. If you have any doubts about a particular term or condition mentioned in the agreement, make sure you seek clarification with your financial advisor.

Get rid of high-interest debts

Living a retired life under a cloud of massive debt is a big no-no. So, if you are a few years away from retirement, it’s time you start considering paying off all your debt. If you have a Credit Card with an outstanding bill, start clearing it. You could speak with your bank and opt for easy EMIs if you can’t pay the entire balance at once. If you have a Car Loan that you are currently repaying, it’s advisable to check the pre-payment conditions. If there’s no pre-payment penalty, you should try and repay the entire loan amount before retirement. Why, you ask? Most Car Loans attract a high interest rate that will burn a hole in your pocket once you retire.

Try and clear any Home Loan you may have as well. Of course, it will affect your savings, but it will be easier to reduce your debts while you still have the job as opposed to clearing them after retiring.

In fact, if you have any high-interest credit, you should consider balance transfer loans. These loans will buy you time to pay off the credit. However, make sure you talk to your financial advisor before opting for a balance transfer since it could affect your Credit Score.

Additional Reading: Manage Debt Wisely!

Trim your expenses

In this step, you have to start evaluating your lifestyle so you can figure out which expenses can be eliminated from your life altogether. How does this help? Well, by the time you retire, you would have gotten rid of a lot of expenses already. You can start by eliminating one or two such expenses every year. By the time you hit retirement, you would have eliminated at least ten unnecessary expenses. Pretty simple, right?

Additional Reading: Estimate Your Post-Retirement Expenses

Post-retirement career plans

It’s understandable that you’re looking forward to a life of relaxation once you retire. However, you’ll be surprised to find out that all the free time on your hands post-retirement could make you irritable. While you may indulge in a few hobbies and travel a lot more than you used to, at some point you may start missing work. So, it’s always good to have a post-retirement career plan. The best thing you can do is convert your hobby into your job. In fact, you could start freelancing. If you love spending time with kids and you love painting, you could start painting classes for kids. You can also start a story-telling club for kids. If you love writing, start your own blog, and for all you know you could start cashing in on it. If you love music and are proficient at an instrument, you could conduct music classes. If you were always the geek who loved to study, how about tutoring kids? It’s all about figuring out what you love to do and then finding a way to earn money through it. It’s the best way to lead a happy, retired life.

Additional Reading: 5 Ways To Ensure A Constant Flow Of Money Post Retirement

After having read all these pointers, you probably have a much better idea about how to achieve your financial goals before retirement. But, if you think you need more time, you can try and delay your retirement by a year or two. Yes, it’s possible. This will not only give you time to add to your retirement savings but will also keep you from withdrawing these savings for a few years more. It’s a win-win situation. If your employer isn’t keen on extending your retirement date, you can always work as a consultant for another organisation. With your experience, wisdom and knowledge, any company would be willing to hire you.

Additional Reading: Financial Goals To Hit Before The Big Three-Oh!

Regardless of how much time you have left before your retirement, it is of absolute importance to have your investments in place. Try exploring BankBazaar if you’re looking for some great investment options.

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