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Financial planning: For old times’ sake

Jan 28 2014, 09:31 IST
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Retirement planning is a crucial part of financial planning that is gaining prominence today on the back of increased life expectancy and rising inflation. Retirement planning is a crucial part of financial planning that is gaining prominence today on the back of increased life expectancy and rising inflation.
SummaryTo make the golden years unforgettable, you must have a sound retirement plan in place. A ready reckoner.

retirement. Also review expenses to see if you can optimise on some of them after retirement, which can bring down the corpus required.

Reconsider your retirement age: Evaluate if you can work beyond the retirement age of 58 years to boost your income. You can also look at working part-time after retirement to bring down the net cash outflow and reduce the corpus required.

Evaluate all sources of income: During retirement, having a regular source of income assumes importance. Most people do not plan this out during the working years. You can invest money in bonds or fixed deposits, which give a regular payout. Or, you can build a regular income from a second home in the form of rental income. Although it is important not to completely depend on rental income, it will reduce your retirement corpus needs. Also, remember to consider all income streams like inheritance or any other sizeable one-off income that you may receive.

Review other goals: Review your other financial goals and see if you can work around saving more for retirement. For example, instead of funding your child’s education completely, you can look at partly funding it and asking your child to take a loan for the remaining amount. This can free up more savings towards retirement.

Reverse mortgage: You can consider reverse mortgage of your house as a backup. This means if you are a senior citizen owning a house, you can mortgage this with a bank in exchange for a regular payment. Although this concept is popular abroad, it has not caught up in India yet, as the bank has the right to sell the property after the borrower passes away to recover the loan.

You can discuss with your children the option of staying with them after retirement, which will bring down expenses for all of you. However, with the concept of nuclear families becoming popular, this may not be very feasible. Remember to always keep your risk tolerance and risk profile in mind when you invest. The need to earn higher returns must always be weighed against the risk you are willing to take, and an appropriate balance must be struck before choosing any option.

The writer is CEO,

Looking ahead

* Increase your savings between now and when you retire

* Consider investing more of your retirement savings in equity mutual funds. When you near retirement, you can de-risk to debt instruments

* Review expenses to see if

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