How To Budget Your Expenses After Retirement

You’ve had a long career, you’ve done the hard yards, and now you deserve to enjoy the fruits of your financial planning. But retirement shouldn’t spell the end of your financial and investment planning – it’s a time to renew your personal finance goals.
Jul 2022
3 mins read
Several factors can affect your retirement savings - inflation, taxes, the rate of your returns, and your investments. You’ll have to balance all of these to ensure you can comfortably meet household and other expenses, and still save for the future. A detailed personal finance and budgeting plan will help you manage your expenses and savings optimally and maintain a healthy retirement corpus.

Drawing Up a New Budget:

● Review your recurring expenses – The first step is to calculate your daily expenses in retirement. This will include expenses such as groceries, utility bills, clothes, maintenance, travel, any remaining loans and gifting.

● Calculate your expected income after retirement – Next, calculate the total income you may receive from multiple sources. These include your company pension, EPFO pension, insurance income or any other policies. If you receive rental income from a property in your name, include that here.

● Calculate your current retirement corpus – You will have aimed for a certain retirement corpus when you started planning decades ago. Many heads of income will have contributed to that corpus over time – EPF, PPF, NPS, bonds, pension plans, bank deposits, mutual funds, insurance policies etc. But with rising life expectancy and retirement age, you might have to reassess. In case you had planned on shifting to debt mutual funds as per your investments for retirement planning, you may want to allocate a portion to equity in light of increased life expectancy.

● Add up your ongoing investments – You should also factor in all your continuing retirement investments. These include your EPF contributions, mutual fund SIPs, ULIPs, and other insurance premiums.

● Calculate how much extra corpus you need to meet your expenses – Finally, try to project how much your present corpus will grow to, based on your current asset allocation, and compare it against your expenses (don’t forget to factor in inflation). You are likely to enjoy higher returns if you contribute to equity funds, stocks and hybrid funds.

3 Personal Finance Habits to Help with Post-Retirement Budgeting:

● Control your expenses and save – Your regular costs will remain fixed after retirement, so you may have to control other expenses like impulse shopping to balance the books. Try to keep saving a little every month to keep your spending disciplined.

● Expand your sources of income – Even if you’ve retired, you could take up consulting work, or perhaps monetise your hobbies. This will expand your sources of income – and every little helps.

● Invest in income-generating assets – It’s important to invest in assets that can help you earn a recurring income. A car, for instance, will depreciate and won't earn you any extra income, whereas a house might appreciate and earn rental income too. You could also try to strengthen your investment portfolio, clubbing in assets to improve the margin of your returns and to lower risks. A good portfolio could be 10% in cash and gold, 30% in fixed income, 30% in real estate and 30% in equity funds. It’s also important to keep aside some liquid assets for emergencies.

You’ve planned so well all these years, so don’t drop the ball now. By renewing your focus on post-retirement goal planning, you can keep money worries at bay and truly enjoy the retirement you deserve.
PGIM India Asset Management Private Limited
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