Retirement planning is an old banger that urgently needs a lick of fresh paint.
Retirement planning, that inevitable palaver just like tomorrow’s sunrise, is a story marked by rife under-preparedness – a global phenomenon, but one that is especially evident in Third World domains like India. Indeed, the kind of retirement planning we get to see normally leaves a lot of questions unanswered.
No more swear-words, here’s what my point is: the lay investor is not ready for a stage in his life when active sources of income have tapered. He is worse off than you actually think, for he has started late, having warmed up to investment advice only recently.
The fact that he is hurtling towards retirement at the speed of Hailey’s Comet isn’t helping either, and he knows his unfinished tasks quite well – a house where EMI payments are only half-way, an adult but financially dependent child, a spouse who is battling with what may eventually be diagnosed as serious diabetes in a couple of years. Well, you do get the picture, don’t you?
Retirement planning is an old banger that urgently needs a lick of fresh paint, is all that we can discuss at this point. It wasn’t always like this, of course, when the investor in question was a much younger individual income-earner, when he could have tackled the issue more efficiently, at a fraction of the cost he is about to incur now.
Whatever else you are doing, please be sure to consider these:
Start as early as possible in terms of actively allocating your assets in keeping with your risk profile. It goes without saying that a younger investor would be able to assume more risks than a relatively mature person. Do it with just a single goal in mind: retirement.
Invest methodically. Systematic investment plans of equity funds would be a handy tool, especially for the patient investor who wants to build a nest-egg over a decent stretch of time.
Other shorter term investment goals can be executed without compromising the central theme – working out and implementing a realistic retirement plan.
The perfect plan would take into account the two principal foes of the investor concerned – inflation and taxes. Both, incidentally, can potentially combine together to decimate even the best-laid plan.
Account for shocking price-escalations in two very critical spheres – healthcare and food. Both are money-guzzlers. The first, in particular, would assume greater significance for you in the days to come.
There are many myths that may have to be busted immediately. “Transportation cost would not be as high for me as it once was”, for instance, is a theory that would be tested more in the breach than in the observance. Indeed, fuel prices would spring a surprise every now and then, and the cost of maintenance of personal vehicles would scale new highs. So would be user charges on public transportation grids.
Retirement under-preparedness needs to be tackled on multiple fronts. Savings and investments would be the most vital issue, and shortfalls need to be avoided at all costs. Your retired years could well be dull, dreary and long-drawn. Deal with them when you have to, but the time to start your homework is now. So, put away that Beethoven CD, cancel the trip to the Bahamas, and focus on what we just discussed today. For you, the clock’s ticking… tick, tick, tick.
The author is Director, Wishlist Capital Advisors