With a longer life expectancy, you’ll most likely have more time to enjoy your retirement. So far, so good but here’s the catch: Living longer means you have a greater chance of outliving your retirement savings. The bottom line is that you’ll need to save more to live comfortably. Retirement planning for women has become very important.
Are we ready up to retire?
While we may live well beyond 80, various factors ranging from occupation, company policy and health may compel us to retire a good 10 to 20 years before we reach this age. Have we built enough financial resources to fill the gap of so many years?
Have we factored in the inflation devil, which continually erodes the future value of our current savings?
Does one really know how much money one needs for retirement? Do we even have a clue?
Have we taken enough health-care to indemnify us against medical expenses?
In case of in-capacitance, do we have enough money put aside to take care of our long-term medical expense and premature retirement?
Very rarely does an individual give a serious thought to these difficult questions. In India, we believe our children will take care of us during old age. With the traditional joint family system eroding and the next generation child moving to different cities, those holding on to this belief may be in for a rude awakening.
Most often, it is only while nearing retirement age that you start wondering if you’re capable of supporting your lifestyle without your salary cheque. More than two-thirds (68 percent) of near-retirees (those aged 55-64) say they do not feel prepared for retirement.
Many people’s lives revolve around the work they do, so much so that it dominates their sense of purpose and gives them the only identity they have. Ask yourself if you’re ready for a lifestyle change.
Before making the transition into retirement and taking any steps you may not be able to reverse, it’s important to be sure that you’re comfortable with all aspects of the new lifestyle you have planned. Many near-retirees realize they will have to make life style changes and financial adjustments after retiring.
Nearly 50 percent said they expect to work part-time, 25% percent will spend more conservatively on entertainment and other non-necessities and 23 percent said they will downgrade to a home that is smaller and cheap to acquire and maintain.
Retirement brings with it a more conservative mindset, inducing one to shift all or most of the savings to conservative investments such as bonds or money market funds. However, with retirement lasting 20 years or more for many people, it’s important to keep a significant portion of your retirement savings invested for growth to help keep up with inflationary increases in the prices of food, healthcare and other necessities.
Before retirement, determine the ‘income’ that will be needed to cover your basic expenses, such as food, housing and healthcare. If you have an annuity coming in, try and make adjustments for it to cover most of these expenses.
From among the many decisions that will affect your finances and your lifestyle in the years ahead, the four key decisions that can have the greatest impact on the decisions you make are –
- Whether you choose to continue to work
- Where you choose to live
- What are the current responsibilities?
- What hobbies and activities you choose to pursue?
Whether or not you feel ready for retirement, it’s important to seek help in checking your progress from reliable quarters. A Pinnacle Wealth advisor can help you chart your progress and decide the best measures to prepare for retirement.