Most of us fail to plan and save for our retirement mainly for two reasons, one tied up with responsibilities and second lack of financial literacy. The second reason according to me is the most important factor between a great retired life and an average retired life.

For most of us retirement means sitting in a rocking chair, watching our children and grandchildren growing and moving towards end of life every day but if you have planned it well and saved adequately then the retirement can be starting a new business, getting additional education, travelling the world, pursuing and expanding your hobbies, devoting time for charitable work so forth and so on as all these activities need good amount of funding.

Three basic reasons why retirement planning should be your priority

1. You can’t work forever, either poor health will make it impossible to continue working or there will be a mandatory retirement age if you are in a job. Could you live comfortably for next 20-30 years without regular income or without adequate funds. This means living in difficult financial circumstances with a fear of running out of money much earlier and losing your financial independence.
2. Health problems are unavoidable as time passes, healthcare inflation is growing at alarming rate. While other financial goals may be negotiable, health cannot be compromised. India, like several other developed countries, do not have a social security system to take care of the retirees. There is neither a free medical care nor a monthly government pay out so you have to depend on private insurance as well as your own funding.
3. When you are thinking about 20-30 years of retired life, you need to consider the rising costs. Inflation is a vital element across the globe but more so in India. If you are unable to keep up with the rising costs, your purchasing power would decrease to around half of what it was at the beginning of retirement and you may have to compromise on your standard of living.

We can identify three phases within retirement

• Active Phase – This is the initial phase of your retirement, where most of the clients are in good health and are interested in more of leisure time activities like traveling or other hobbies. This phase typically is of 5 to 8 years where client start to spend like there’s no tomorrow. If not planned well for this phase both in terms of allocating a corpus for all your desires and utilising the corpus as per the allocation you can easily outlive your corpus way early in your retirement journey.
• Passive Phase – This is the middle phase of your retirement of 8 to 12 years where you tend to be settling down in your retirement. The discretionary spending gets normalised and will likely decrease. This is the phase in which few people are looking for giving away gifts to the loved one and philanthropic or charitable giving. Unless planned well this will have a negative impact on the retirement funds.
• Final Phase – This is often a time for decreased wellness, resulting in increased medical expenses. This is the phase when your health insurance is most needed but health insurance does not cover all healthcare concerns like personal incapacity. A condition may arise due to dementia or a paralytic attack where one need services of a care taker for long. This will create the need for additional funding and required a provisioning in your retirement plan. Wealth transfer is another issue which need to be taken care during this phase. A precaution should be taken to keep enough assets to meet the ongoing needs of the client. Though it is a separate topic of legacy planning but an important consideration for planning retirement.

As you can see retirement is not just about taking care of daily living expenses post retirement for few years. It is all about ensuring financial stability in your later years avoiding dependence on others. It requires extensive planning to develop strategies and techniques for wealth accumulation and wealth utilisation and off course awareness and understanding of retirement related issues.

You can trust us at SSK FINSOL to get the competent and ethical advice on Retirement.