Re-imagining Retirement

Re-imagining Retirement

In your youth, retirement may seem a distant thing to worry about. Yet, in order to lead a comfortable and dignified retired life, financial planning is necessary. No matter what your ideal retirement looks like, be it a relaxed time at home with family and loved ones or one with adventure and travel, it will need money. Investing for retirement has to be reimagined in this age. Thanks to the times we live in where financial management tools and investment instruments allow us to afford so much flexibility. Retirement planning has hence become a creative exercise.

Mr Dhirendra Kumar, Founder & Chief Executive of Value Research, believes that in recent years, there have been two fundamental changes that have radically altered the way people look at retirement. One is longevity in terms of life expectancy, and the other is the healthcare cost and the general inflation cost of living. Earlier, people could manage to save for retirement without much planning. However, today, an individual has to give ample time to plan for retirement.

How does the pandemic impact retirement planning and investment decisions?

The pandemic has taken root in nearly every country globally, upending people’s personal and economic lives. This has definitely dealt a heavy financial blow to many people. Mr Lovaii Navlakhi, Managing Director & CEO, International Money Matters Pvt. Ltd believes that one has to plan for retirement in the early stages, and even if you do, it won’t go exactly as planned. However, the plan so far will provide for some action to be taken or some provision for contingencies like these, and that’s a crucial impact that one needs to take into account. So, even if you could not grow your investment due to the crisis, the previous investment may have recovered and performed well in recent times. So, for people in this kind of emergency, all the previous savings should be maintained, and as we move forward, there is recovery, which will compensate for the time and money lost due to the pandemic.

Mistakes to avoid when it comes to investing for retirement

People often think managing finances is a complex process, and this is one of the major reasons why people make mistakes with respect to money matters. According to Mr Sashi Krishnan, CEO, National Pension System Trust, these are the biggest mistakes people make when it comes to investing for retirement:

No specific plan for retirement

Not recognising your financial needs

Not setting clear goals

Not estimating a proper figure

Not having a clear vision for the future

Thinking that there’s enough time to do it later

So, to have the right retirement plan, all these issues need to be addressed. All that is needed is to ask and answer. This will provide a kickstart to your planning process.

Changing investment strategies after retirement.

There are many strategies that can be applied immediately after retirement. Bhavdeep Bhatt, Head, Retail Sales, Aditya Birla Sun Life AMC Ltd, outlines two of such strategies that people can apply. One of them is the bucket strategy, just like any conventional financial planner would suggest that first identify your short term, medium term and long term needs and accordingly allocate your assets with the combination of some conservative asset class like fixed income deposits, debt mutual funds, and equities in different proportions for your diverse needs. He provides an alternate approach where you can invest in asset allocation products like mutual funds, including product categories like balanced advantage fund, and then keep withdrawing systematically through SWP (Systematic Withdrawal Plan). These are just some of the suggested approaches, but the strategies will vary depending on the individual’s needs and goals.

Conclusion

Growing old can be expensive. Although frivolous expenses might reduce, medical bills are only likely to rise. The burden of inflation and not having enough money to sustain future costs can cause stress and worry. The purpose of having a retirement investment plan is to ensure financial stability in your later years without depending on others. Planning your retirement strategy essentially includes setting aside some funds and investing specifically with that goal in mind. Ultimately, your retirement strategy will depend on your final goal, income, and your age.

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

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