10 must-dos of retirement planning

It is usual for many of us to aspire for a financially secure and happy retired life. However being financially prepared to meet the demands of retired life by saving and investing requires considering and following the 10 doctrines of wise retirement planning.

A look at the 10 doctrines to wise retirement planning:

1. Provide for contingencies

Most of us tend to underestimate our retirement needs. Provision for medical emergencies with inadequacy of medical insurance in old age requires financial provision. Lack of government social security schemes and retirement benefits to self-employed and private sector employees creates requirement for more provision for contingencies after retirement.

2. Think that you will live long

This is true with increased life expectancy. Now you will have more years of life after retirement. Thanks to medical advancements. So it is better to plan for the additional years and avoid living frugally in old age.

Ramalingam K, an MBA (Finance) and Certified Financial Planner, is founder & director of Holistic Investment Planners (P) Ltd (http://holisticinvestment.in)

It is wise to provide for contingencies arising that require you to retire early. You could suffer ill health, lose your job, or need to care for a sick or elderly member of the family. Women may have to opt voluntarily to look after the family needs.

All this requires more savings for retirement needs.

4. Beat the inflation before it beats you

Inflation affects the personal finance needs of the working class, but pay rises could help them resolve it to a certain extent. However the retired have to save more to reduce the impact of inflation. Investing in modes that give you extra returns could help greatly.

Investors come to me and say 'I would like to accumulate Rs 2 crore and retire'. But when we really work out the inflation adjusted retirement corpus, the Rs 2 crore would not be sufficient for him to have comfortable retirement. Rs 2 crore may feed you enough in the first year after your retirement.

The returns from the same Rs 2 crore will not be sufficient for you to take care of all your needs on the tenth year after your retirement because of the skyrocketing inflation figures.

Most of us underestimate medical expenses after retirement, with these expenses being inevitable in old age. Hence more provision for medical insurance helps. A consideration of your family's general health, family history of certain genetic disorders, and the class of hospital you get treated would help in proper estimation for medical insurance.

6. Provide for your spouse and dependents who may outlive you

It is inevitable that this need should not be overlooked. Your spouse and dependents need to live a secure financial life after your lifetime. Taking up insurance policies during your working life and well thought out retirement planning will take care of your dependents and spouse financially.

Sometimes we may be ignorant of benefits on retirement like provident fund, gratuity and other benefits. In India the lack of social security schemes after retirement makes it necessary to invest more in good income generating sources for steady flow of retirement income. The advice of investment consultants, along with financial education and information contributes to good financial standing after retirement.

8. Educate yourself about retirement savings plan management

When the majority is relying on the pension schemes in the form of ULIPs offered by various public and private insurance companies, as a smart investor you need to understand the hidden charges of these pension policies. These policies are all heavily front-loaded.

So you need to evaluate various investment options available for retirement. You need to accumulate sufficient knowledge in this regard. In addition learning to keep track of them with professional help makes these saving plans work for you.

Your retirement plans need to be financial plans to make income last you a lifetime. Pensions or annuities providing best income need to be safeguarded, as withdrawing large sums from them could end you in financial insufficiency in the final years of your life.

10. Take professional investment advice that works

Many do realise the importance of financial advice from professional financial advisors, but in practice seek it from family, friends and colleagues. A right financial advisor could give you good investment advice to have financially secured retirement life.

A final note

I am sure you want to emerge financially secure for your retired life and will follow these ten financial tenets to wise retirement planning.