Here’s how you should manage your finances post retirement

Posted on Monday, January 29th, 2018 | By IndusInd Bank

It is always considered important to manage your income, but the need to do so becomes more critical post retirement when your income mostly comes from your savings instead of earnings. For most of us, our saved up income – saved over a course of years during our working years – is limited post retirement. Hence, it becomes important to make it last through the rest of our lives. This simply means that you need to determine your income needs for years leading upto your retirement, and thereafter, managing the assets to last your lifetime. Read on to know how you should manage your finances post retirement to enjoy the life to the fullest.
It is very important that you start managing your funds early in your life to have a financially backed up post-retirement life. Your life’s savings will become your income during your post-retirement life as you will have limited alternate source of income.
It is quite normal if you are among those people who have not started planning for your retirement. Here is a list of few common reasons why people do not save or do not save enough for the retirement.

1. Retirement is not on the priority list:

We plan our finances according to the priority list, and if retirement does not show up in this list, how will you plan for it? People have their own goals, dreams, or responsibilities that make it difficult for them to think about their retirement time. If you belong to this group, then it is better to start saving for your retirement as early as possible. People who delay their retirement planning are often the ones who are forced to work beyond their retirement age to earn enough to meet even their most basic needs.

2. Exigency expenses:

. There can be certain exigencies like medical expenses, house repairs, loss in business etc. This does not mean that you withdraw from your funds that are meant for retirement corpus. Meeting your exigent expenses from retirement corpus will only jeopardize your retirement investment goals. Along with the retirement plan, build an emergency fund to meet such exigencies. You could also opt for loans to meet short-term expenses.

3. No retirement plan by the employer:

Many companies do not offer retirement benefits to their employees, and to complicate the situation further, these employees fail to save for their old age. Do not let the unavailability of pension scheme affect your golden era. Explore your options and start saving for your comfortable retirement life.

4. Do not have enough money to contribute for retirement plan:

It is a myth that retirement plans are expensive. You can start saving depending on your budget. This small step will open gates to a relaxed and happy retirement. It is always better to start than to delay savings for your retirement. Plan for your future, and plan it well.

5. Don’t Procrastinate:

There are people who understand the importance of saving for retirement but still fail to invest. They keep delaying the investment only to realize one day what they have missed. So stop pushing the date to plan your post-retirement finances, and start it today.

Another situation could be that you have saved enough for your retirement, but you are stuck up with the tricky issue of how to control your assets.
Retirement corpus planning should be done with impact of inflation. E.g. when future expenses are considered one will have to factor the cost of inflation.
One of the most important factors you should consider is to have regular income from your savings while keeping your principal amount intact. You can consider the following points while planning your finances post-retirement:
1. You need to take the current expenses in to account and factor in inflation at the time of retirement years and plan accordingly. Make monthly budget of all the expenses. Take an average of all the utilities: electricity, water, telephone bill, internet, gas, petrol, taxes, groceries, medical, and leisure expenses. This amount may fluctuate owing to an increase in the inflation rate.
2. Take a track on your savings. Go through the statement of your savings and retirement account to make sure that there is no unwanted expenditure.
3. Invest in traditional and/or non-traditional investment options. PPF and FD are some of the traditional routes you can opt for today. Mutual funds lumpsum/SIPs and investment in equity market if planned properly over long term may provide for substantial returns over a long period. Ensure that you do a proper asset allocation and seek help of a professional investment manager.
4. Make changes to your assets by considering your life expectancy, to ensure a smooth sail throughout.
5. You do not want to risk your assets during retirement period as safety of capital would be paramount. So, shift your assets from high risk instruments to low risk/low return kind of investment option. While reallocating your investments, check for its liquidity as it will influence the withdrawals you might want to make.
6. Even when you change from a high-risk saving scheme to a moderate or low-risk saving scheme, you need to plan your investments wisely.

By following these steps you can make adjustments to your savings and expenses so that you do not have to compromise on your lifestyle or retirement goals.
Maintaining a monthly expense chart will also help you determine the amount of money you require from your retirement account. Contact your retirement plan service provider and inform them of the amount you want every month.
Your retirement savings is tax free. Withdrawing money before 60 years of age will entail a levy of withdrawal charges. At times of emergency, if you plan to withdraw some amount, consult your financial planner for minimum tax and charges.
Financial planning is important, especially for your post-retirement life. Do not wait till your pre-retirement years to start financial planning. The early you start, the better position you are at post your retirement. If you have not started planning yet, contact your financial planner and discuss the various plans available.