Traditionally retirement has been a life stage which was defined by the regulation. Taking into account today’s stressful work life and the strong urge to relax or maybe try something “new” individuals are not shying away from taking the leap making a swifter transition. We see a marked increase in the length of the “retirement” life-stage. Hence the retirement phase needs attention not only from the traditional view of providing for ongoing requirements and estate planning but also focus on how to maximize this phase by consciously working towards being active throughout.

The focal point of an ideal retirement plan is not money; it’s about how one visualizes spending the new found free time. It could mean pursuing a hobby, spending more time with family, planning for periodic vacations, volunteering or maybe just acquiring new skillsets. What’s important is to feel financially secure to be able to pursue any of the above leading to satisfying retirement years.

A simple approach to being financially fit is to adopt the bucketing tool. The corpus built over a period of time can be categorized under different buckets with varied intent ensuring the various requirements are met:

• Maintain Standard of living – Providing for the essentials: The focus here is safety and some guaranteed returns to take care of essential requirements. With the intent of investment being preservation, the returns on such products are usually lower than the markets.
• Maintain Lifestyle: The first bucket though provides a high level of safety it falls low on the returns it generates. To ensure the retirement nest does not erode its purchasing power, it is important that a portion of the nest keeps pace or moves ahead of inflation. The return on investments that can be classified under this category are predictive and not guaranteed. These investments would also provide an opportunity to fund the lifestyle requirement like providing for regular vacations, socializing and recreational activities
• Enhance Lifestyle: This bucket can be opted to build an estate for the next generation depending on the total assets accumulated. Considering this bucket is being created with a long-term view, the investment focus can be solely generating returns with considerable exposure to high growth-oriented investments

Thus Financial Planning and planned monitoring are to enjoy a good quality of life today while preparing for critical transitions while aging. Personalized and structured Financial planning helps maximize opportunities by ensuring funds are rightfully allocated. A firm foundation with a clear holistic view and assurance of financial security becomes a basis of successful active aging strategies -enabling, motivating and maximizing engagement towards an enhanced quality of living.

The onset of older age-related conditions

The onset of older age leads to increased susceptibility to diseases and other chronic age-related ailments resulting in declining physical and functional activities which may call for special long-term care. From the financial Planning perspective, it’s always recommended to have some funds for the retirement kitty earmarked to fund these needs. This could be part of the “Enhanced Lifestyle Bucket” in the initial years and gradually rolled over to the first bucket. In the initial years of retirement when the need for such requirements in comparatively lower, these can be set aside with an objective to grow at the rate of medical costs that has shown an inflationary trend of nearly 10% to 12% which is way above the regular inflation

Any medical situation could create a large dent in the overall retirement nest. Hence, it’s advisable to include an annual charge towards maintaining a health insurance to cover any hospital costs in the early years of retirement while increasing the dependency on self-funding in the latter years. Health insurance alone may not be sufficient to cover for all the medical requirements coming up during the course of time considering insurance costs too increase with the increase in age. Thus, a combination of insurance along with a separate medical corpus is an essential component of money management. Having covered for health requirements separately contributes to the peace of mind

Personal Loss and Financial Implications

The only certain thing in life is that it will end one day. That knowledge is perhaps the defining feature of the human condition. Loss of a life partner not only leaves one emotionally stressed, but it also has many financial implications. The financial arrangements built over the years are impacted at different levels for eg. the way pension incomes are structured, regulations with respect to the transfer of title or laws on inheritance. It is important to be prepared for such life transitions enabling the surviving spouse to have access to the money when needed the most.

Having a succession plan in place ensures a seamless transfer of assets to the surviving family members. This gives the time and comfort for the surviving family to overcome the distressed times and adapt to the new normal life.

Although an ideal retirement plan must start the day of the first paycheck received, this requires immense financial discipline and focus. Having said that, it’s never too late to revisit the current state to embark on the journey of being financially fit.