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Financial Planning for Senior Citizens: How to make your retirement funds last longer

Sunil Dhawan
retirement corpus calculator, bank fixed deposits, SCSS, post office monthly income scheme, thumb rule, withdrawal of 4 per cent,

For all those who are retiring in the near future or those who have retired, have a somewhat similar concern related to their retirement years. Most of the senior citizens want to know how many years will their retirement corpus last. For any retirement corpus to last longer depends on several factors such as one’s age, the amount of corpus, monthly expenses, asset-allocation, return on investments and inflation, life expectancy, amongst others. While other factors are in one’s control, the inflation during retirement and life expectancy is not in one’s control.

The other important factor is the risk of reinvestment of funds. In a falling interest rate scenario, your investments may not fetch the same rate of return thus impacting your regular income needs. Therefore, to make retirement funds last longer, one needs to carefully plan one’s retirement and ensure that that the retirement savings last for a long time.

Senior citizens have to manage three things during their retirement years-Regular income, Liquidity and Growth. Here are some pointers to help them decide to carve out a functional financial plan during retirement.

As per data, women have a longer life expectancy and tend to live longer. Therefore, plan accordingly for longer non-earning retired years for them. To meet a regular income need, a retiree will initially want to put money into fixed-income investments that are safe and give an assured return. Some of the investments a senior citizen or a retiree may consider includes bank fixed deposits, Senior Citizens Savings Scheme (SCSS), post office monthly income scheme, immediate annuity scheme amongst other such schemes.

However, as a retiree considering life expectancy and inflation as an important factor, one should not ignore investments into equities which could be Hybrid or Balanced funds or large-cap index funds. Some portion of your retirement corpus can be put in them without going overboard in them.

If one doesn't have a large enough corpus to meet monthly needs, one needs to withdraw a portion of the corpus in order to meet the expenses. As a thumb rule, an annual withdrawal of about 4 per cent of the corpus is assumed to be a safe option. Remember, the lower you have to withdraw the better it is for you. One may use the retirement corpus calculator before opting to withdraw funds.

Make sure you have adequate health insurance for self and spouse. If liabilities are over, you may not need life insurance. If there are any pending financial liabilities such as a home loan or personal loan, make sure you clear them as early as possible. Plan for your annual travel and monthly medical needs and also keep an adequate amount of emergency funds.

The role of financial planning is equally important during retired years and should be strictly followed. Remember, for most, it could be only a pension or dividend that they could rely upon as a regular salary income would have stopped.

Plan for regular income in such a way that capital erosion is not there. Stay away from high-risk investment schemes especially those that promise high returns that are too-good-to-be-true. Make sure you understand what are Ponzi schemes and are able to identify them before committing funds to them.

If you want to leave a legacy for your children, you need to properly account for them. Also, make sure you have nominations and a Will prepared for easy bequeath of your assets and property to your family members. As far as possible, live off the capital and not on the capital!