Are you really ready to retire?
So many of us who have a choice about when we want to retire keep saying “I want to retire”. Do we really mean it? Many of us just mouth it. We may have no clue about what to do when we retire. Lost 2 friends recently – both under 60 – they had no plans to retire at 60. Lucky guys. When I hear about such deaths, I actually feel happy for them!! Sorry digressing.
You are ready to retire if you have done the following:
- researched where to live for the period from retirement to a stage when you need geriatric care. You may not have finalised but you did consider old age havens like Coimbatore (assuming) and you know what to look for in such homes.
- you have seriously considered what to do in retirement: you better prepare yourself for a real long retired life..so you should line up enough activities to keep yourself alert, fit, flexible, and of course happy.
- you have made a retirement financial budget: you have actually sat down with your spouse and found out how much it will cost to run your family expenses when you retire. You know where the money goes, how will inflation impact it, and what expenses will vanish once you retire.
- You have a withdrawal strategy MADE WITH THE HELP OF A PROFESSIONAL: this is one area where I would expect you to seek the help of a seriously good professional. It is like trying rollerskating on a banana peel. Only a few IFAs have worked on this area so you need to be careful.
- You have confirmed that you can actually retire: check and double check the amount available and your expenses are affordable. If you live till age 87 what happens? what if it became 97? be prepared with annuities. If your standby plan is a reverse mortgage or hoping that children will look after you, WRITE IT DOWN.
Tell me, if you have not done these things, are you really serious about your retirement? think again please.
LuckyOye
A retirement age of 58/60 made sense when life expectancy was around 70. If life expectancy jumps to 90, it stands to reason that a retirement age of 75/80 is logical. If you’re living longer, shouldn’t you be working and productive for a longer time as well?
Sai
4% withdrawal rate! I am sure you heard about it. I don’t know why somebody needs a professional where we know that they themselves are not clear about the details. I think unless an individual is a HNWI, its not worth paying high fees to the so called Professionals. In HNWI case firstly they can afford it & secondly they are already financial literates. 🙂
param
4% withdrawal rate is based on monte-carlo simulation on credible us historical data. there is nothing that provides any confidence it works in india. also, preparing for the long-tail outcomes is still unaddressed.
i see many retirees happy to see a nominal growth in their kitty without realising the impact of inflation (which might make them depressed).
Santy
Sai, the 4% withdrawal rate is for US conditions and US type of lifestyle. It doesn’t account for your kid staying in your home because he lost the job. It doesn’t account for expenses from your daughter’s child birth, ceremonies, etc. It doesn’t account for helping your kids home downpayment or gifting a car for your first born. And for most Americans their retirement age is 62 but still they have jobs to work till 65-70. Unless you are head or CFO of your organization, what chances do you have if you want to work at 65?
Sai
@param, Do we have any data which shows that hiring a professional planner would work in India for aam admi (not HNWI)??
@Santy, Exactly you dont want to work after 62 yrs, thats my point. Thats why it becomes even more critical. So how can Professional can get us through without having to extend the work tenure? CFO’s are mostly HNWI’s, which we are not addressing now.
Santy
A professional helps you to realize the money back policy you had invested is Junk when you are 30 years old and not 50. He ensures that you have sufficient cover in Term & accident insurance, so that a single hospitalization doesn’t ruin your future plan. He helps you to differentiate that the TV upgrade for this summer was a want and a health insurance for your parents is a need. Forces you have an emergency fund, so that you dont sell off your mutual funds when the market is at all time low. Financial planner cannot help when you are 62 but probably can help to define what you do at 62.
Sai
@Santy, the money back policy is junk at any level. Did you even notice the expense ration on these funds?? On top of it commissions along with the fee to so called professional!! In short all aam admi needs is s good low expense ratio broad market MF or Index fund to be invested regularly, a health insurance, a term plan & about 6 months expense money on FD. I dont see the need for aam admi to even look if the market is low,high, medium…Also I dont see the need for the Professionals for this..thanq
Santy
Yeah Sai.. You are correct. You dont need personal accident cover. You dont need medical cover for your parents. You dont have to look at the goals and asset allocation. Just invest in Index and withdraw when you need. Simple. Why should anyone pay for professional?
Sai
Ohh yeaa Santy it really makes sense to pay exorbitant fee to the so called professionals for the very important Accident cover and medical cover for parents, but cant suggest a decent low fee fund as a primary investment option…
Santy
Define: Exorbitant? If you are ready to pay 50K premium for a policy, you are ready to pay 10K for a financial planner. The commission paid out in the policy is almost same as financial planner fees. You dont need to be HNI to pay that fee.
PS: I am not a Financial planner by any means. Don’t assume that I am promoting myself here.
Sai
Santy!!! The products (policy as you mentioned) which you are mentioning itself shows that it is not worth going for the planner. These so called policies you keep to yourself. common man doesnt need those.
Yea yea you are definitely not a FP, I can see there no push from you what so ever.
Santy
🙂 You believe what you want. I don’t have to prove myself to anyone in the internet. Good luck!
Sai
U have already proved it :-)… u have fun..