Except for the lucky few who have enough wealth, no one is indifferent to what happens when you stop winning. The fear of the unknown is always present.
We have all known seniors who struggle to meet all of their financial obligations. When you don’t have enough money, life becomes difficult.
Rely on traditional deposits for interest income
Many retirees go through a cycle of overspending and underspending. When an employee retires, he receives this amount of money, which can vary between ₹50 and ₹60,000,000. That sounds like a lot of money. This is almost certainly more than the retiree has ever received in a single lump sum in their lifetime. They believe they have unlimited purchasing power. Many investors assume ₹50 lakh to be a big sum and hence withdrawing an equal amount every month without realizing that the money would sustain them for a limited time. Another way would be to set aside ₹15 lakhs and put the rest ₹35 lakhs fixed deposit for five years. That way they can afford ₹25,000 every month for five years after which they would have just over ₹48 million. They can then set aside again ₹15 lakh to earn a monthly pension income of ₹25,000 while keeping the rest ₹33 lakh fixed deposit. This way the cycle continues even if it is marred by the inconvenience of only having ₹25,000 each month to pay expenses, regardless of the continued devaluation of silver.
Some can put their money in Seniors Savings Plan (SCSS) earn quarterly interest at eight percent per annum. However, given the effect of inflation on current living costs, would these investment methods be sufficient to pay for a retirement life of 30 years or more?
The above assumptions are only assumptions made to draw attention to the inadequacy retirement planning. To begin with, a retirement corpus up to ₹60 lakh is simply not enough to support the remaining years of one’s life, especially when there is no income and increased susceptibility to hospitalization and medical care. The tendency to stick with traditional investment options after retirement stems from the firmly held belief that the retirement corpus should be invested in 100% safe options. This “safety net” is all most seek and it is this mindset that has caused many retirees to depend on loved ones for emergency money or finances.
Decide monthly withdrawals
Moreover, the concept of “safety net” is a misnomer and can be qualified as “delusion”. Realizing how much inflation can hit our savings and eat into our long-term income, it makes sense not only to choose the right post-retirement investment options, but also to decide how much corpus one owes. withdraw without losing the total amount to expenses and inflation. At the current rate of inflation, it would take four times as much money to pay our daily expenses, which would require not only shuffling the accumulated corpus to earn more money, but also allowing for larger withdrawals during the golden years. of his life. Assessing how much you would need can be as taxing as assessing how much you would need to withdraw each month to live comfortably throughout.
How much money should you withdraw each month?
It’s not rocket science to decide how much to save, invest and withdraw to avoid depleting your retirement corpus. Common sense determines how we should decide our withdrawals based on the interest income on our savings and the corresponding rate of inflation. Withdraw only what your savings earn above the rate of inflation to support an inflation-adjusted withdrawal rate. Think carefully. You need not withdraw more than one percent of the corpus each year if your savings are earning eight percent and inflation is seven percent. This will ensure that your savings grow at least in line with inflation, preventing you from losing all your money in old age.
Eight percent returns from debt fund or other investment opportunities may not be enough, highlighting the need to invest in stocks as well. However, equity investments should be continued for at least five to seven years to meet medium-term needs. financial goals and over a decade or so to achieve long-term financial goals.
We tell you how to retire in your 40s
First publication: January 17, 2023, 07:57 STI