The first and biggest change is the fact that you will no longer be getting a monthly paycheck. So managing your finances post retirement will be your primary task. You can achieve this by reconfiguring your investments for retirement.
With a stop in regular earnings, you will need to reduce the risks in your investment portfolio by investing in secure options like senior citizen FDs offered by Bajaj Finance, which offers up to 8.75% interest. Alternatively, you can look for investment options for senior citizens where liquidity is easy. Calculate your expenses and manage your cash flow to meet your requirements.
Before you plan your financial restructuring understand your monetary requirements through the 3 phases of retirement.
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The ‘Fun’ Years: These are the immediate years after retirement, when you are healthy, looking forward to keeping yourself busy with travel to visit unexplored parts of the world and your many relatives. In this phase, your expenses will be high so you need to plan accordingly. Ensure you have saved enough capital to last for the rest of your retired years. Consider liquid investments such as fixed deposits. Use an FD calculator to calculate the returns expected from various short/medium FD options on offer.
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The ‘Better off at home’ Years: As you overcome the travel bug from immediate retirement you will settle into a routine which will be involving for you, yet not demanding on your health. At this time, your expenses will reduce drastically from earlier as you settle into scheduled monthly expenses.
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The ‘Limited’ Years: At this stage of retirement, you will find yourself scaling back your daily activities due to physical limitations as you age. While medical advancements ensure you will be taken care of medically, you will spend more time at home, lowering your monthly expenses and perhaps increasing your spends on medical help.
As the phases of retirement determine your cash requirements, you need to map your retirement income to help you enjoy your retirement years without financial stress. Here is what you need to know.
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Reduce investment risk: As you retire, you should reconfigure your investments to lower risk categories and ensure you get a monthly return to fund your day-to-day expenses. Remember, any loss in the retirement corpus during the first few years or retirement can have lasting impact on your long-term wealth. Keep this in mind as you decide on the next phase of investments. Fixed Deposits are great secured investments that offer guaranteed returns.
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Ensure stable income to meet basic expenditure: On retirement you will need a regular income to compensate the stop in monthly earnings. You will need to reconfigure your investments to ensure that you receive adequate monthly returns to meet your expenses.
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Keep an eye on tax expense: As you focus on creating a monthly income, you need to keep in mind your tax outflow as well. This is because all your earnings will still continue to be taxed on retirement. Plan for this unavoidable expense to avoid a shock at the end of the year.
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Ensure investment growth: When you start long term investments in your twenties and thirties, your focus will be in creating assets. However, on retirement, your investments need to focus on providing inflation-beating income for the foreseeable future. At this time investment security will also become important.
Retirement should be a great time as you feel free from the cares of the world, especially the daily grind of morning traffic and work tensions. Instead, you can now focus on peace of mind. Enjoy these precious years to the fullest with smart investments.
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