10 Retirement Challenges and Their Solutions

Not everything in life goes as planned. The same holds true for retirement planning as well. Here are a few challenges that you may face along the way and suggestions on how you can successfully overcome the situation.
Sep 2022
3 mins read

1. Declining income or job loss
The pandemic saw a lot of abrupt job losses and there were other scenarios where people had to face pay cuts. Employees who were heavily dependent on commissions and incentives faced a tough situation as their income levels suddenly plummeted.

To overcome such a situation, it is always important to identify an alternative source of income, such as in the form of additional freelance work or rental income or even earnings from your existing investments.

2. Loss of pension
Abrupt job loss also leads to the potential loss of pension. This will also hit the EPF scheme in which you were building a substantial amount of funds towards your retirement goals.

In such circumstances, you will have to ensure that you are also building a stable fund over and above your employer-sponsored realm of schemes.

3. Severe illness or disability
Many individuals were pushed into abject poverty during the pandemic as they had to provide for their hefty medical bills. There were other scenarios when people dipped into their financial savings or long-term investments to manage their health expenditure.

This is not a rare phenomenon. It is important to get optimal health insurance, especially now that we know such contagions are an ever-present threat. Insurance (life and health) should become an integral part of your comprehensive financial planning.

4. High health costs or lack of health insurance
With health costs consistently going up, a lack of health insurance can be detrimental to your finances and retirement corpus.

This is a classic case of incomplete investment planning. Always invest in health insurance that comprehensively covers your health risks.

5. Death of a close person in the family
Death in the family can be emotionally stressful. The stress can deepen if the person was an earning member or one with substantial assets which are critical for your overall financial goals. It is important to avail insurance (life and health) to cover for the unfortunate eventuality and to plan your will and ensure that your estate planning is done at an appropriate time.

Another important consideration while investing: remember to fill out the nomination details – this way your family won’t have to run from pillar to post during an already stressful period.

6. Taking care of aged or sick people
India remains deeply rooted in its culture. Many individuals stay with their parents and continue to care for them while they age. Instances of illness among aged people are natural. If your employer allows the inclusion of elderly parents within the group insurance plan, then you should take the cover.

Create an emergency fund that will ensure that you have substantial cover for health-related or other emergencies.

7. Financial problems of family members
As a family oriented culture teaches us to take care of near and dear ones as part of a familial social security net, we may face situations where we have to take care of a family member in need. An emergency fund can be helpful in meeting some of these unforeseen social commitments.

8. Losses in investments
A periodic review of your investments is imperative. Monitoring your investments to ascertain if they are growing in the desired manner can help you deal with intermediate losses in investments.

There may be situations when you are required to strategically realign your investments to cut your losses and align your portfolio in line with your risk profile.

9. Inflation
When investing in any avenue, always look for real returns. This refers to nominal returns net of the inflation rate.
For example, if you were to invest in a fixed deposit with post-tax returns of 4.9% p.a, then assuming an inflation of 4% p.a, your net real return would be only 0.9% p.a. Inflation is a critical factor that erodes the value of your money, hence it must be made integral to your investment planning.

10. Taxation
Some investments offer tax benefits under Section 80C up to Rs. 1.5 lakh, allowing you to save significantly on your taxes.
For example, if you were to invest the entire limit of Rs. 1.5 Lakh in tax saving instruments like Equity Linked Savings Schemes (ELSS). It could potentially save up to Rs. 46,800* of your taxes if you fall in the 30% tax bracket. These investments can also be aligned with your retirement planning goal.

These tips will help you overcome challenges in achieving your retirement goals, for a peaceful retired life – but always consult your financial advisor when making a decision.
*Calculated at the highest tax slab for the FY 21-22 applicable on investments u/s 80C

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