Most people realise the importance of retirement planning and ensure that they build a healthy corpus to live a relaxed, stress-free life. However, is mere investments to achieve a specific target enough? To one’s dismay, no. One needs to ensure that they practicefinancial planning even post-retirement to enjoy the golden age truly. Let’s understand this with the help of an example*.

Rahul recently retired last month. He has a wife and two children who are dependent on him. His investment portfolio consists of long-term investments in equity funds, that have accumulated a decent retirement corpus. His PPF (public provident fund) has matured, but he has been extending it in 5-year blocks and continues to hold the financial portfolio. Five years ago, he invested in a 2-BHK house in his home town. He is also endowed with life insurance and health insurance cover. Rahul feels he has toiled and saved enough money for his future. He now wants to relax and enjoy life and take it easy. But can he?

In the absence of a pension plan, Rahulshould put his retirement corpus in an income-yielding investment such as an MIP (monthly income plan), bonds, bank deposit, mutual funds, etc. This, along with the rental from his second home (2-BHK),is most likely to take care of his alternate income.

His revised asset allocation ought to reflect the change in financial goals and objectives (likely to be shorter-term, such as children’s marriage, world tour, etc) and the change in risk preference (usually risk-averse). Therefore, he needs to systematically move his money out of equity fund into short-term securities such as debt and MIP. He should make sure that he is not too conservative as the portfolio must still fight the devious inflation, fees, and taxes. Maintaining liquidity is also crucial. Therefore, Rahul could redeem his PPF and opt for a debt fund, thatoffers relatively higher liquidity.

Once he has ensured that the sources of alternate income are in place, Rahul and his family can afford to spend on luxuries and holidays, now that they have achieved the milestone they saved so meticulously for. However, he must realise that the expenses borne by him during his pre-retirement phase might not be the same as the post-retirement phase. In the absence of a regular income, keeping up the habit of saving while cashing out unwanted expenses would ensure a financially stable retirement. It is essential that a realistic budget is put in place and strictly adhered to. Rahul must ensure that the risk cover meets all medical expenses and any emergency expenses.

It is a matter of personal choice whether Rahul wants to consume all his savings before he dies or leaves his estate to his children. In case he decides to go with the latter option, he should take up estate planning. Also, Rahul might find it emotionally satisfying to move to the house in the native town, while simultaneously lowering down monthly household and living expenses. Given a progressive reduction in quality of life and choices one makes in old age, Rahul would have to ensure that his corpus is well preserved for a ripe old age.

Hope this clears upcommon misconceptions regarding retirement planning and the need to adopt it even after retirement. One can always turn to an expert for soundadvise for financial planning. Happy investing!

*Examples are for illustration purposes only and in no manner should be considered as the suggested investment option.

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