Investment tips to keep in mind post retirement

Despite our best efforts and attention to planning for the future, life catches us unawares. We end up in situations for which we are completely unprepared. In India, where financial literacy has been an evasive pursuit for the majority of the population, it is common to find many people feeling lost once they cross the retirement milestone. The thought of living the next few decades without a regular paycheck brings up worries about finances, especially for those who may not have been able to create a substantial monetary reservoir to fund their retirement years.

If you have recently retired, here are a few financial tips to ensure your post-retirement years are not marred by financial concerns

Saying goodbye to debt

If you carry high debt liabilities into your retirement years, your best-laid retirement plans can be blown to smithereens. To ensure a smooth financial journey after retirement, accelerating debt payments should be your priority. This is because servicing debts, especially those that carry high-interest rates may be a challenge with retirement income. Add inflation to the picture and you hardly have any room left for saving and investing for your goals. If the debt load is too high, you may also be forced to tap into your retirement reservoir to clear them and this can jeopardize your long-term financial security. Building a successful portfolio of investments can also become difficult if you are burdened by loans

Do not shy away from equities

Ideas about saving and investing post-retirement tend to have heavy undertones of the convictions and preferences that you may have held in your pre-retirement years. Consequently, retirees struggle to wipe the slate clean and wean away from old investment habits post-retirement. One such example is the notion that equity investments should be kept eons away from the portfolio after retirement. While equities as an asset class have a high-risk element and you may need extra caution when dabbling with them considering you may not have an active income after retirement, the thought that equities should be avoided completely is misguided and fallacious.

Equity investments are the only asset class that has the potential to deliver long-term inflation-hedged returns. They are an essential element in the portfolio of retirees because fixed-income instruments are not as efficient when it comes to long-term wealth creation objectives as equities. On the other hand, leaning excessively on real estate and gold post-retirement may not be judicious either. This is because investing in real estate at this stage of life may be challenging as real estate investments require a high volume of lumpsum capital and you would also have to incur significant expenses for maintaining the property. Gold can bring in an element of safety in the portfolio, especially as a hedge against inflation but gold has liquidity and storage problems and in the long run equities offer better inflation-adjusted returns than gold.

Taking the mutual funds route

For those who have retired and feel too many inhibitions about investing in equities, mutual funds can be a good start as they are a much safer way to tap into the earning potential of equities rather than plunging headfirst into stocks. You can start with mutual funds that have a debt component too such as hybrid funds and multi-asset funds and you can invest small amounts through systematic investment plans (SIPs). SIPs allow investors to invest fixed amounts of money at regular intervals irrespective of the market conditions. This way you can buy a higher number of units when the markets are low and similarly, lesser units when the markets are high. Thus when you invest per month via SIPs, it brings down the average cost of each unit and this helps you mitigate the impacts of market volatility to some extent. This approach can help retired people maintain the desired asset allocation in their portfolios without having to time the market or skip the equity component.

An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund

All investors have to go through a one-time KYC (Know Your Customer) process. Investors to invest only with SEBI registered Mutual Funds. For further information on KYC, list of SEBI registered Mutual Funds and redressal of complaints including details about SEBI SCORES portal, visit link : https://mutualfund.adityabirlacapital.com/Investor-Education/education/kyc-and-redressal for further details.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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