- Half a decade before you retire is a good time to review your goals to check if you are on track.
- As you move towards
retirement , you need to sequentially shift your allocation from high-risk assets like equity to safer investment options - Focus on paying off high-interest
debt like credit cards or personal loans that can significantly erode your retirement savings
If you have only five years or less left to retire, you are near the end of the retirement planning phase. Here are 5 things you need to do right now:
Review your retirement goal
A common advice one receives for retirement is to have clear objectives and goals to plan methodically. Even if you are not very clear on your objectives till now, this could be a good time to review your retirement goal and check if you are on track.
“Since retirement is approaching near, one can re-calculate the amount one should require post-retirement. Their lifestyle and health needs can be taken into consideration. Retirement calculators online will help you come to a goal amount. A ballpark amount may be calculated as: 25 * annual
If one has not already, one may look at seeking help from a registered financial advisor. Professional planning can help you recognise the common loopholes one may overlook in personal financial planning, and guide you in the right direction.
Change course if you are falling short
If you are falling short, there is only so much you can do. One way is to plan and take up employment post-retirement, even if it is on a part-time basis. The skills and experiences you may have built over a long period may help you grab premium remunerations for lesser time spent, so that you may reach your goal faster.
At the same time, it is important to look at ways to increase
Make a plan to shift your
The peaceful way of planning retirement is to sequentially shift your allocation from high-risk assets like equity or crypto to safer investment options like debt or gold. This is because the markets may be volatile and you may lose money on your investments over the short term when you may find yourself in need of urgent money.
“Safer investment options differ from person to person. While some prefer moving to blue chip equities, some shift to balanced advantage funds, bonds, debt funds, gold, etc. Generally, a combination of these instruments is used,” says Shah.
However, this will apply to the core retirement corpus only. If one has invested money to create a corpus over and above retirement needs, or build a legacy for the next generation, shifting investments to safer assets is not necessary.
Pay off your debts
At this stage, managing debt becomes critical. Focus on paying off high-interest debt like credit cards or personal loans that can significantly erode your retirement savings. Consider consolidating them into a lower-interest loan to simplify repayment and free up monthly cash flow.
For your home loan, the strategy depends on the remaining tenure. If it's nearing completion within five years, continuing with your existing EMIs might be suitable. You'll be debt-free by retirement and can allocate those funds towards retirement income.
“However, if you have a significant surplus, consider prepaying a portion of the home loan. This reduces the overall interest paid and shortens the loan tenure, freeing up some monthly income for additional retirement savings. But remember, to prioritise high-interest debt repayment first,” says Anooshka Soham Bathwal, Founder & CEO of Dhanvesttor, a wealth management firm.
Constantly keep track of your interest rates and see if you can get better interest rates elsewhere so that you can refinance your loan and save on interest.
Look at health insurance
Look to increase your health insurance coverage. “To do this, review your existing plan to ensure it covers hospitalisation expenses, pre and post-hospitalization costs, and critical illnesses. If not, consider upgrading or purchasing a top-up plan,” says Bathwal.
At this age, premiums on your health insurance may be expensive, so may look at plans with co-pays or deductibles. In the case of co-pay, you have to pay a percentage of your hospital bill while in the case of deductibles, the insurance coverage will kick in after a certain amount. When you opt for a policy with co-payment and deductibles, you will be able to get a higher sum assured for a lower premium, as long as you can afford to foot a part of your hospital bill.
With some planning and rejigging, you can ensure a happy and carefree retirement!