This is your chance to take up the things for which you lacked the time or money during your working life. For instance, research shows around 65% of seniors wish to spend their retirement fund on leisure travel. Good post-retirement goal planning can help you actively pursue these leisure activities, helping you enjoy retired life without having to worry about managing expenses.
But to set the stage for post-retirement leisure, you must have well thought-out retirement planning goals. Identifying the right investment and income options, along with efficient asset and investment allocation, can help raise money for your fund. Try to choose investment avenues that will protect your wealth and help you overcome inflation and taxes. Ideally, you should look out for efficient inflation-adjusted returns to help you manage your daily expenses as well as provide enough for recreational activities.
Here are four steps to help you manage your expenses
and finances so you can find more money for leisure activities:
● Fix a regular source of income – Plan your retirement fund so that it can both preserve your wealth and help generate the returns you need to meet your leisure expenses. A fixed bank deposit with a monthly interest pay-out plan can be a risk-free and stable instrument to earn a regular source of income. An alternative career option post-retirement may also provide steady income. Research indicates that about 57% of seniors still look forward to working post-retirement to achieve financial independence and stability.
● Build an emergency fund – As the pandemic has shown us, an emergency or contingency fund is essential to handle unexpected expenses, which could otherwise swallow up the money earmarked for leisure. Build a fund for around 12 months, which will cover all the essential monthly expenses you will face post-retirement. Keep this fund in a liquid form so that you can withdraw it quickly when required. Also remember to invest in both health and life insurance to ensure your contingency fund does not drain out due to health emergencies.
● Account for essential expenses –
There are certain essential expenses that’ll always need to be met, no matter what. A consistent, guaranteed income can ensure that you’ll be financially secure to meet those expenses and have enough set aside for leisure. A life insurance annuity plan may provide a regular source of income post-retirement
to help take care of basic household expenses plus any added medical emergencies. An immediate annuity may also help you in investing the retirement corpus and receiving a steady pension, while letting you choose the frequency of pay-out that suits you—monthly, quarterly or yearly.
● Amass wealth for leisure – Once you’ve fixed a regular source of income, created an emergency fund, and apportioned investments for your essential expenses, you can finally focus on meeting your leisure expenses. Mutual fund investments for retirement planning can help in amassing money for your goals. Allocate a portion of your retirement corpus in equity mutual fund schemes as per your risk appetite to help meet the inflation rate. Choose from a range of large-cap, flexi-cap and hybrid funds. Keep two main parameters in mind while choosing a mutual fund scheme – quantitative factors such as returns across time periods and market cycles, risk ratios, and portfolio turnover; and qualitative factors such as portfolio features and the expertise of the fund management team.
Once the fund is created, opt for a Systematic Withdrawal Plan (SWP) to generate regular income at fixed intervals (monthly, yearly etc.) There are several advantages of investing and withdrawing in the post-retirement phase. You can plan your withdrawals more efficiently, protect your wealth from inflation, earn opportunities from rupee-cost averaging and let compound returns take care of your leisure expenses. With SWP, you will not only know how to save better but also how to spend better—a win-win. However, in the case of equity mutual funds, there may be short-term or long-term capital gains applicable, depending on your holding period as well as volatility.
With sound financial planning, you can enjoy true freedom after retirement – to see the world, pursue your interests and do the things you’ve always wanted to do. A flexible retirement portfolio will help you meet these goals and enjoy a fulfilling post-retirement life.