A Retirement Without Financial Worries
Many retirees wonder how best to invest your money. Financial planner Shyam Sunder gives you some suggestions.
As a financial planner, I meet with people at different stages of life. Of these stages there are mainly four, namely, accumulation, protection, consumption and succession. As people travel through these stages, we discover two types of people. Some will have too much money at the end of their lives. Some will have too much life at the end of their money. Both of these situations are not desirable.
Let us take the second type first – too much life at the end of their money. This is easier to understand, but harder to solve. While running out of money is never desirable, the worst time is when you are well into your retirement. Clearly this is a problem that is much easier to solve when you are in the accumulation stage of your life.
If you think you may run out of money at some stage in your life, there are four things you can do to remedy the situation.
- You can increase your income, by moving to a higher paying job and by choosing to work longer.
- You can decrease your expenses, both the routine and big-ticket splurges.
- You can make your assets work harder for you by modifying your portfolio.
- You can reduce or eliminate your liabilities.
While all four avenues are possible at any stage in life, the first one may be harder if you are well into your retirement. Even here, though, things are improving as options for a second innings grow.
Now let us look at the first type – too much money at the end of their life. Where is the problem, you may ask? Clearly, it is better to be in this boat than in the earlier one. But good financial planning helps you not only increase your wealth, but also enjoy it better.
I meet many senior citizens who led a frugal life, and are saving up for their children. Several of them have bought two flats, one for each child. Now, they find that not only are their children very well off independently, but are also unlikely to ever live in those flats. The children want nothing more than for their parents to travel, enjoy themselves and spend their money.
If the above picture sounds and feels like you, what can you do?
Start by writing your will. But this time, also think about how much money you would like to bequeath to your children. Come up with a number, and imagine you were making out a cheque to each of them for that amount. What is left over is for you, to spend during the rest of your retirement.
This leaves one problem, not a trivial one at that. How to spend your money? For someone with both time and money, travel is a great way to really enjoy your retirement. You could pursue hobbies that you considered too expensive earlier. Contributing to causes you really believe in bring tremendous satisfaction and purpose.
Setting a goal and working towards it often makes complicated and difficult things simple. I recommend that you set a financial goal for yourself as shown above. Have a terrific retirement!