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Retired with too little? Here's What You Can Do

Don't bury your head in the sand when it comes to how the numbers stack up. You could consult a Financial Planner or do the math yourself, but do the math you must

Photo Credit : BW Archives

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It's an oft ignored fact that burgeoning expenses and poor savings strategies are fueling what could well be an impending retirement crisis - not just in India but globally. To top it off, we've got the joint family system gradually breaking down and lifespans actually going up owing to better quality of medical care. It's estimated that a 30 year old spending Rs. 30,000 per month today will actually be spending closer to Rs. 200,000 per month when he retires at Age 60 to maintain the same lifestyle! Even a Retirement Fund of Rs. 4 Crores is likely to be completely wiped out by the time he turns 80. If you're in the "not so happy" position of having retired with too less, here are 5 things you can do in order to manage the situation.

Extend your Retirement Date
Chin up! India is a land of opportunity, and even if you're unwilling to endure corporate drudgery beyond the sixth decade of your life, there are multiple low cost options you can consider. You could be a consultant in your area of expertise, or do part time work. Teaching is a fantastic way to transfer your years of experience to the future generations. Either way, it's not a bad idea to consider extending your retirement date for an additional 5 years or even more. If it's any consolation - continuing to work after 60 may actually be good for you, as it'll lend a sense of purpose to your life and help stave off boredom. An interesting study of Shell Oil employees actually showed that "people who retire at 55 are 89 per cent more likely to die in the 10 years after retirement than those who retire at 65"!

Do the Math and reconsider your expenses
Don't bury your head in the sand when it comes to how the numbers stack up. You could consult a Financial Planner or do the math yourself, but do the math you must. Figure out how many years you can stretch your retirement fund (considering a very reasonable, low to moderate risk rate of return and a 7 per cent post retirement inflation) and take a hard look at the facts. If need be, cut unnecessary expenditures brutally in order to get your monthly outflows into the 'safe zone'.

Shyam Sunder, Managing Director of Bengaluru based PeakAlpha Investment Services wisely advises his newly retired clients to "work out how much one can spend, and live within one's means". Sunder provides a simple thumb rule for retired investors to estimate how much monthly income their post-retirement assets can be expected to fetch. "For Equity assets, a Crore fetches a Lac, and a Lac fetches a thousand. For debt assets, it would be half that, after taxes", he offers.

Evaluate your Real Estate Holdings
If you've got property in your name, it may be a blessing in disguise. Dispassionately evaluate your property holdings (even your self-occupied one) and figure out if there's a better option available. Maybe you could let out your property and move in with your kids, or even sell your property and move into a smaller one - using the remainder cautiously to generate a reasonable monthly income for you.

Sunder of PeakAlpha believes that a newly retired person's real estate holdings can come in handy. He advises clients to liquidate excess real estate holdings and transfer the money to more productive liquid assets. He also advises his clients to consider optimizing their real estate holdings by way of paying guest arrangements, AirBNB, etc. If the situation permits, Sunder feels that Reverse Mortgages can be a useful option as well.

Seek Family Support
Although this is the age of 'sar uthake jiyo', it really does make sense to have a frank discussion on your finances with your family members and seek out their support. You may be surprised at what quarters help sometimes lands up from. See if a win-win situation can be worked out that leads to mutual value creation.

Avoid the temptation to speculate
It's all too common to suddenly press the panic button AFTER you retire and want to grow your money exponentially by making risky investments. This really is just wishful thinking and cannot result in a good outcome. You need to follow a balanced approach with your retirement fund, regardless of how much you've retired with. Mistakes can cost you dearly - and even wipe out a large chunk of what little you've put together.

Having said that, it would be vital to not go to the other extreme and park all your post retirement assets purely into low risk assets such as fixed income bearing securities. Sunder helps put this in perspective. "It is a misconception that a retiree should have no or minimal exposure to equities. Risk aversion alone is not sufficient to determine asset allocation. Once major life goals are met, retirement actually gives one a long investment horizon... so yes, if other options are not possible, this may not only be prudent but even necessary", he advises.


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