Ideally, one should start working on a retirement corpus as early as possible. There is no substitute for a long-term, well-planned and sound investment strategy for achieving any financial goal. But if you have missed planning your retirement in your 30s and 40s, can you still do it with just 10 more years left for retirement? Yes, you can, but your investment options at this age will be limited unlike your earlier years when you had more options to explore. In case you haven’t started yet, you have no time to waste. Here is how to go about it:
Calculate Your Corpus Requirement
Calculating your retirement corpus will give you an idea of the approximate amount required to financially secure a retired life. There are a few crucial factors like inflation, daily expenses, medical needs, life expectancy after retirement and expected inflation-adjusted rate of return on investment that you need to take into account. To maintain your existing lifestyle, calculate your corpus by applying the expected inflation rate on your daily and medical expenses for the numbers that are left for retirement. This will give you a figure for the daily and medical expenses you would need every year post retirement. You can also seek help of a financial calculator to get an idea about how much money you would need after retirement.
Go Aggressive On Investment
At this landmark age of 50 years, you must have taken care of all your possible financial responsibilities like your children’s education, owning a home etc. Since now you have attended to all these important needs, you can now channelize your money into investments that can help you build a sizeable corpus. Go aggressive and direct your money into building a retirement fund, but while doing so do not pick up wrong investments. Weigh your investment options by assessing them on returns, risks, tax incidence etc. that can help in maximizing your saving.
Work On Your Portfolio
Once you have a plan in place for investment, work on a portfolio that assures generation of an income that can address all your money needs. It would be a wise move to have a diversified portfolio in place that minimizes risk and generates a regular income. You can also have a healthy blend of both debt and equity investment instruments to minimize the risk aspect and benefit from both in returns.
Retire Your Debts
At this stage, when your focus is retirement planning, do not take any step that add to your financial burden. If you have any existing loans, try to pay them off before retirement. Also, keep your financial needs within the limits of your disposable income. In case taking a loan is inevitable, work on a plan that does not dent your savings. For instance, if your child needs a loan for higher education, go for an education loan with your child as a primary borrower. A loan can be paid later by him/her after he/she starts working.
Buy Health Insurance
It’s best to buy a health insurance policy before you touch 50, but if you haven’t, you still can but it will cost you more. A health policy bought at an earlier stage costs lesser and may not require going through health tests. However, buying one after 50 may be a little more complicated, though this should not discourage you. Health insurance is one of the pillars of your finances and will protect your retirement corpus when the health problems that are inevitable with age come. If you already own health insurance, consider buying a top-up or super top-up to deal with medical inflation.
It is never too late to initiate savings for retirement. Besides working on a financial plan, you can also explore other job opportunities that can generate income good enough to take care of your needs in your golden years.
The writer is CEO, BankBazaar.com