Retirement Plan – What Do You Include?

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Decades ago, people could chalk out a retirement plan with an assumption that the children would have settled down, before they turn 60.

It’s not the scenario any more. You marry in early thirties, have children in late thirties or early forties and your children are likely to get married later than that.

Let me share a few plans that used to buzz around in the past.

1. Employees living in a residential colony provided by employers.

“We can utilise the club and colony garden facilities for the wedding, while we are still in harness.I’ll get my son/daughter married before that. It saves on cost, and the staff helps out with organising the event.”

It’s a story from a bygone era. The children will not agree to getting married early for a free venue. Maybe they ask for a five star hotel or destination wedding. And some of them may not reach marriageable age before you turn 60.

2. A guy applied for a loan for his niece’s wedding 

I asked him why does he not save the same for his teenage daughter. He said his nephew would start earning by then, and help him out with his daughter’s wedding.

No longer can we rely on such family co-operation or promises. You are on your own.

3. Now, you are my precious assets…

It was not unusual for parents to say, that the provident fund is being spent on a house and a wedding, and the sons have to take care of them thereafter. After all, they have invested in making them what they are today.

You are laughing at me. Aren’t you? Who lives on these assumptions in post-modern times?

Then, what are people doing now?

HOW DOES A RETIREMENT PLAN WORK TODAY?

Everybody has a retirement plan with PF, VPF, PPF, mutual funds and annuity plans, or at least 3 of these, along with a health insurance. A few lucky ones can count on employers’ pension and family pension. 

A few have had meetings with their financial planners, and chalked out plans to cater for an assumed cost of living.

Here comes the moot question.

What do you include in cost of living?

And what kind of expenses can come up, other than cost of living and healthcare?

Arindam has a 30-year old son pursuing a PhD abroad. He has not started earning, and depends on his parents to support him.

Megha’s daughter is divorced and has returned home. She needs support to up-skill herself and find income opportunities. If she decides to remarry, Megha may have to shell out some more money for the ceremony, even if it is less than what they spent in the first instance.

Amish is very happy about settling down in his native place post-retirement, amidst the entire clan. He has not included the cost of gifting in his plan. The endless weddings, christening ceremonies and other social do’s are a big drain on his monthly expenses budget. It is the price he has to pay for community living.

Rahul wants to travel, while his wife is keen on continuing her social work which needs her presence in the country. They hadn’t included the costs in their plan.

WHAT DOES AN IDEAL RETIREMENT PLAN LOOK LIKE?

Let me talk about trends first.

There’s an increasing tribe of people who provide for children’s education, but not weddings. That is too uncertain a scenario. Children are likely to be in live-in relationships, settle and marry abroad, choose to remain single. It is not too much to expect them to spend on their own weddings, or settle for a simple ceremony.

Next is acceptance of a hard fact.

There is no ideal retirement plan, since the future is unpredictable. We can only be prepared with liquefiable assets and cash in our kitty.

  1. Funds cannot always be allocated for a specific purpose. A new item of expenditure may spring up.

2. Apply the concept of laddering. In the first 5-10 years after retirement, continue to save and invest in an annuity plan, which starts yielding a pension after 5-10 years. It takes care of inflation.

You can enter NPS after retirement

3. Don’t lock money for the long term. We live in a VUCA world, and will have to revise plans at several stages.

4. If one lives on interest and rental income, there is no harm in starting liquidation of the main assets beyond 75 or 80. Withdraw a small percentage of 3% or 4% every year.

If one can find a way of earning – moonlighting, a small business, online earning opportunities, writing, publishing – one should continue doing it. The work-from-home culture cuts across age and geographical barriers. 

IMPORTANCE OF LEARNING

The ones who suffer most are the minds which are stagnant, and expect things to continue as they are now.

Learning keeps the mind young.

Learning helps you stay updated, and adapt to the flow of life.

More on this later.

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