While planning for retirement, three types of risks should be considered – longevity risk, lifestyle risk and health risk. Longevity risk is when you outlive your corpus, and lifestyle risk is having to compromise on your needs and aspirations. The health risk is unexpected expenses due to hospitalization and age-related illnesses.
Anup Bansal, Chief Investment Officer, Scripbox, says, “Both types of risks – longevity risk, and lifestyle risk – determine where to invest, and how much to invest.”
Hence, it is crucial to consider the following factors while planning for retirement and budgeting your lifestyle in the future:
Saving for daily and lifestyle expenses: You should not have to compromise your lifestyle after retirement. Daily expenses in your retired life may differ from the existing ones you have now.
Bansal says, “As inflation increases, so will the prices of necessities and maintaining a lifestyle. This should be well-reflected in one’s budgeting for retirement.”
Healthcare expenditure: Experts say this is one of the biggest expenses that occur post the 60s. Experts say one along with one’s partner must start investing in a high-value health insurance policy in their 40s to avoid claim rejection or financial vulnerability in the future due to critical illnesses.
Building an emergency fund: Saving for emergencies in your 40s is quite common; we all have an emergency fund saved for a rainy day. The same, experts say, should be applied to retirement planning.
“One can invest a certain amount separately for creating such a fund for one’s retirement beyond the typical saving and investing. It should be enough to last for at least 12 months,” explains Bansal.
Life Goals costs: While you were in full-time employment, you may not have spent time on some of your life goals like travelling, golfing, reading, vacation homes, etc. While you would have saved enough for retirement, according to experts you must consider factors that can affect your life goals.
Bansal points out, “Life goals factors weigh more on one’s lifestyle choices. It is better for one to be clear with one’s goals when there is still time to smoothen the retirement life.”
Part-time Work and Volunteering: Retirement also entails more time at hand so productive use of time keeps the mind healthy and removes unnecessary stress. This has the effect of creating an overall feeling of well-being, hence, experts say one needs to think about how one can best use one’s time once he/she retires.
Bansal suggests, “This can be with some enjoyable part-time work and/or volunteering with social organizations.”
Reach your financial goals with the help of an advisor: While DIY is all that’s going on right now, and you can execute the basic financial planning for your retirement, however, it is best to consult a financial advisor that can help you with 360-degree perspectives on your investments, risks undertaken, lifestyle choices, financial requirements, and more.
“Retirement is said to be the second inning of life and if the financial planning for this phase is done meticulously, one can reap the benefits,” explains Bansal. Retire well, so you don’t have to look back.
