Any person who is approaching retirement or retired; would wish to get a consistent flow of income to meet the daily expenses. Life expectance has increased due to increased awareness, lifestyle changes, physical activity, and health care, which can be difficult if not worked out well in advance. A person can lower risk during the retirement phase than in the accumulation phase to provide specific cash flows and support a comfortable retirement. So, there must be some plan for both capital preservation, and appreciation, which is conflicting. Replace the traditional way of thinking with active portfolio management by focusing on both safety and future needs.
The Asset Allocation:
A common impression during post-retirement is, we must keep all assets in safer debt instruments. It sounds good theoretically, but fails in addressing the larger problems during the long-term. There is a need to do thorough financial planning to estimate the actual needs and then chalk out a proper portfolio with quality assets and proper diversification comprising cash, debt, equity, and physical assets like gold. Including physical assets like gold for diversification and equity component in the form of a systematic investment plan (SIP) for beating inflation over the long-term. It will make an individual’s retirement planning more feasible and advantageous as the anticipated post-retirement period may extend to 20-25-30 or more years. Thus, when it comes to portfolio planning for post-retirement, one must think about numerous asset classes as per the need.
Most financial planners think that the bucket method to retirement portfolio planning may work better than other options like flooring or a systematic withdrawal plan.
Bucket 1: 5-20% exposure
Products: Bank Balance/Cash/Liquid mutual funds
Horizon: Immediate/very short-term/short-term
Bucket 2: 20-60% exposure
Products: Term deposits/debt mutual funds/small savings schemes
Horizon: short to medium-term (5 years)
Bucket 3: 10-40% exposure
Products: Balance funds/diversified equity funds/Gold
Horizon: long-term (5-10 years)
Bucket 4: 0-20% exposure
Products: Aggressive equity mutual funds/direct equity
Horizon: long to very long-term (>8 years)
Buckets & funds summary
Retirement funds can be well invested in buckets 1, 2, and 3.
Regular payments/medical bills; etc. can be met from Bucket 1 and Bucket 2
Fill the Bucket 3 from Bucket 2: Invest any surplus earnings of bucket 2 through SIP or by STP into equity to fill bucket 3
Refill Bucket 2 from Bucket 3/4 by STP/ Switch/shift at regular intervals over time
Going beyond buckets and portfolios!!
Have sufficient health/medical insurance.
Keep all valuables/jewelry in safe custody, mainly if you are living alone.
Take extra care about your security.
Keep fit and healthy and avoid frequent medical bills by following a nutritious diet and adequate physical exercise.
One can look for additional income sources by way of leasing out of property/paying guests.
One can opt for a reverse mortgage for monetary assistance/income if he doesn’t wish to pass on inheritance to any dependents after his demise.
After long years of hard work, one should not hesitate to retire. But accept and think as it is a fact of life and a beginning of the bright life. He can involve him-self actively politically, socially, or spiritually. In this phase, money carries less importance, but it forms a critical aspect as one has to meet the basic needs and be self-sufficient in maintaining a remarkable life. By taking the help of an experienced financial planner and avoiding investment blunders, one can reach his target retirement corpus and monthly cash flows as per plan.
Take help: Retirement planning has to be done earliest in life, disregarding ones age, which is a very critical need. By taking the help of an experienced financial planner and avoiding investment blunders, one can reach his retirement corpus target and monthly cash flows as per plan.
Also, read our articles “Best ways to boost your retirement corpus," “Is retirement planning necessary," "Making a realistic and winning retirement planning," "Misinterpretations during preretirement investing."
By Team Wealth ATM
Visit for financial freedom.
Please feel free to write to us on below mail id for more information and better financial planning. We are always ready to help you.
info@wealthatm.com
Mutual fund investments are subject to market risk. Read the scheme related documents carefully.