Cusp of retirement
Preeti Chandrashekhar lists out a systematic financial plan for retirement
Preeti Chandrashekhar lists out a systematic financial plan for retirement
All of us realise the importance of saving for retirement, especially when we get closer to the date. Take the case of Mr. Kumar. He is 59 and has one more year to retire. He has been thinking about this and planning for over five years, considering various aspects that he thinks are important. While on a morning walk, he met up with some of his friends who were discussing about life after retirement. This got him thinking actively on whether he has considered all factors to assess the level of sufficiency of his retirement funds to meet his needs.
He decided to make a checklist of his immediate needs towards retirement and the possible future expenses he is likely to have post retirement.
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The cash outflow has to be compared and matched (in timing and quantum) to the possible income stream. It is best to match the nature (lump sum or periodic) of the outgo with the nature (lump sum or periodic) of the asset.
Ideally, Kumar should first deduct all his likely payments from the lump sum retirement benefits. The balance amount is what is available to him to be invested in suitable instruments in order to generate a regular income stream post retirement. It is also important to strike a balance between lump sum income and a regular income stream to take care of monthly expenses.
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While trying to project his income and expenses post retirement he also needs to adjust them for future inflation (including medical inflation that is typically 2 to 2.5 times the economic inflation). He would also need to look at various products available for investment and map them to his expected tax liability post retirement.
While financial wellness does take away a lot of stress from retirement planning, physical and psychological well-being are equally important. Kumar should explore ways of keeping himself active and also engage in cognitive activities to keep the mind agile.
As one does not have much control over the number of dependants or employment opportunities available post retirement, these may become a hindrance. Such negative influences can be countered by proper financial planning for retirement and a positive attitude by adopting healthy behaviour and habits.
Cash outflow
Immediate needs
Cash inflow
Excluding current salary
Post retirement needs
Preeti Chandrashekhar
India Business Leader – Retirement,
Health and Benefits, Mercer
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A decumulation or withdrawal strategy post-retirement is as vital as the accumulation phase.
In the book “Retire On Your Terms! A Guide To Holistic Retirement”, author Rajesh Minocha explains why retirement is not just a financial decision but much more, which could be the beginning of a new journey.
ICICI Prudential Life Insurance has launched the ICICI Pru Gold Pension Savings scheme, a pension product offering up to 60 per cent tax-free lump sum withdrawal on maturity.
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