Five things you must do for happy Retirement

Many are realising? the importance of retirement planning in India. These individuals are aware of the importance of saving regularly and investing across asset classes. The good part is this tribe is rising in number. Building a large enough retirement corpus for golden years is a clearly defined financial goal for many. But not many are clear about the things they should do to achieve goals of retirement planning.??

Here are five things you should do to ensure a happier retirement:??

Invest Right

Tenets of personal finance recommend investments in line with the risk profile of an individual and his or her financial goal. If retirement is far away and an investor is comfortable with some amount of volatility, then the investor should allocate money to equities. As one moves closer to retirement, the money should shift from equity to bonds and safer avenues, to protect the corpus created. However, while doing so the key aspect is to allocate more to well-regulated tax efficient investment avenues such as mutual funds.?

Diversified mutual fund schemes such as flexi-cap, multi-cap, multi-asset and aggressive hybrid can effectively be used to build retirement corpus by initiating systematic investment plans.?

Mutual funds not only compound money in the long-term at low costs, but also help to postpone the tax incidence.?

Stay light on physical asset?

While tax efficient financial assets can work wonderfully for most investors, physical assets can be a serious drag for many especially in the old age. In golden years, the ability to take over labour-intensive tasks goes down. Many individuals find it difficult to maintain real estate The situation becomes tougher if they are staying with their kids in some other city and their real estate is in their hometown. This can be a daunting task both physically and mentally.?

The idea is not to sell off every piece of real assets, especially those inherited. But there should be a line drawn how much one can maintain and pass over to the next generation. The Next-generation’s plans to own and maintain real assets should also be paid heed to.

But one thing that can definitely be done: do not buy real estate with a retirement corpus with a hope of selling it at a higher price If the gamble does not pay off, then there is less scope for course-correction at a ripe age.?

Opt for flexibility?

Avoiding high allocation to real estate, ensures flexibility. A logical extension of this should be to allocate less to hard-coded investments. For example, an investment that pays a fixed sum of money each year, irrespective of investor’s wish. This may not be as rewarding as one with offers flexibility of withdrawal. Many pension plans offered by life insurance companies fit this description. Even National Pension Scheme withdrawal options are somewhat like this. While some allocation to these investment avenues can be considered, going overboard on these can be a painful, especially if the cashflow needs changes and there is no corpus to fall back on outside of such hard-coded investments.

Mutual funds, bonds, and fixed deposits offer the much-needed flexibility.?

An eye on inflation?

Given the flexibility bonds, fixed deposits and debt mutual funds can be looked at for retirement funding at a later stage, they should not form a large chunk of the investment portfolio in the initial phase of accumulation. This is because they tend to underperform inflation. Lifestyle upgrades also play a crucial role. Retirement is a long-term goal and inflation can create havoc if not taken into account well. So, select investments that can beat inflation.?

Be conservative?

Beating inflation requires estimating it right and then preparing a game plan to earn superior returns. However, it is easier said than done. In most cases, inflation has two components – general inflation - increase in price level of current consumption basket, and lifestyle inflation – an upgrade in consumption patterns causing increased expenses. While estimating inflation one should factor in these aspects. Also, over the long term returns may vary and hence investors must be conservative while estimating the expected returns. The only way to tide over the situation is aggressively invest more money than expecting higher returns on the capital employed.?

Investments tend to compound over the long term and leave the investor with a decent retirement corpus. However, investors must keep feeding more to their retirement corpus from time to time. Ongoing monitoring of the retirement corpus, rebalancing at regular intervals and corrective steps can go a long way ensuring an adequately funded retirement.?

?

Disclaimer: This report is prepared in his personal capacity and neither the Author nor Money Honey Financial Services Pvt Ltd assumes any responsibility or liability for any error or omission in the content of the article. Investments in mutual funds and other risky assets are subject to market risks. Please seek advice from an investment professional before investing.

?

?

?

?

?