What’s common between Mark Zuckerberg, Brad Pitt, Rupert Murdoch, Maria Sharapova, Heidi Klum, and you?
That’s right. Nothing.
Let’s it do it again. What’s common between Mark Zuckerberg, Brad Pitt, Rupert Murdoch, Maria Sharapova, and Heidi Klum?
Right again. They’re stinking rich. Ergo, they don’t need to plan for their “retirement”.
But, you do!
So why is financial planning important post retirement?
For starters, when retired, you don’t have a regular income in the form of a salary. As a result, you can’t bank upon a cash flow every month to take care of your expenses. You may face unexpected financial emergencies which you may not be able to meet unless you have a plan in place.
Sustaining your pre retirement lifestyle after you retire is not a cakewalk and requires smart planning. Not to forget those one-off luxuries you may want to indulge in when you are old!
Again, if you have an income during retirement like pension or a rental income, then financial planning is required to invest this wisely. Financial planning is not a one-time exercise which results in the ‘lived happily ever after’ tag line. You need to constantly review and update your plan to reflect your current scenario.
This is not just true for life after retirement, but even for people who are in employment as well. The bottom line is that if you want to be comfortable financially, it makes sense to plan your finances even after you retire.
So, how do you go about planning your post-retirement phase?
Although there is no ‘one size fits all’ approach which can be adopted, you could use the following tips:
Set up your monthly income: First, plan your investments such that you receive a regular income from these investments. Fixed deposits which pay you monthly interest or dividend mutual funds are a good choice.
If you are a risk-taker and do not have the need for a regular income, then the regular interest amount you receive can be invested in equity mutual funds in the form of systematic investment plans. This ensures your principal is safe, while at the same time your returns make money for you.
Monetise your assets: Evaluate if you can monetise your existing assets. If you have a second house, you can let it out on rent. Alternately, you can also evaluate if a reverse mortgage makes sense in your situation.
Similarly, if you have a car that you no longer have a need for, lease it out or sell it outright. The extra cash in hand can earn some more of its ilk! For those of you who are gold aficionados and have a war chest of gold that can put Fort Knox to shame, there are gold savings accounts to help convert the shiny metal into crisp notes.
Build an emergency corpus: Constitute an emergency corpus which can take care of atleast 12 months of your living expenses. This is important, especially if you are dependent on an uncertain income stream like rental income.
You may receive windfalls at the time of your retirement. If you have any critical goals to be taken care of, you can use this windfall amount for the same. This ensures your savings are intact when you retire.
Plan for a second career: You could also plan for a new source of income after your retirement. This is a part of boosting your cash inflows and therefore is an integral part of your financial plan.
Freelancing in your area of interest or joining as a guest lecturer in a college in your subject of expertise are good options. Consulting is a good and respected way of putting to use what you’ve gained over the years through experience.
If you have surplus cash to set aside, you could start a business with a small corpus. You could also join as a part time employee or as a member of advisory board in a company, depending on your calibre and experience. In today’s world of the internet, there are several options one can look at.
Retirement is a beautiful phase in your life, provided you are financially fit. Make this second innings be a worthwhile and fulfilling one for you.
Who knows, you may soon receive a call from the hunky Mr. Pitt, inviting you to their boys’ club (or from the delectable Ms. Sharapova, to their girls’ adult sorority)!
YOU MAY ALSO WANT TO: Use our Compound Interest Calculator, Fixed Deposit Interest Calculator or Retirement Savings Calculator to give shape to your financial planning.