Goodbye Tension, Hello Pension

Retirement, superannuation! These are words that seem to be distant and unreal when a senior executive is engrossed in work; be it for chasing business targets or closing deals, mentoring future leaders or creating value for the organisation by dint of sheer diligence, application and intelligence. Speaking from personal experience, you suddenly assume the significance when terms like succession planning, seamless transition are discussed in the corridors of power. Then the realisation dawns that your executive career is drawing to a close and the life that you have known is now setting.

While dealing with the emotional aspects of impending retirement is a challenge by itself, a lot of time and effort need to be dedicated in planning out how to deal with the financial implications. This process has to commence early, maybe even a decade ahead of the scheduled date while the going is good and regular income is flowing in. This will enable you to set aside funds for the proverbial rainy day, without compromising on ongoing consumption and non-essential expenditure budgets.

Life insurance and mediclaim, obviously, remain the first check boxes that need to be ticked off.  You need to ensure that you get the calculations right, taking into account the growing medical needs and increasing cost of treatment, your own current health and future obligations towards other family members.

Planning for continuation (or otherwise) of large-ticket liabilities, especially home loans or children’s education loan, is another crucial issue. Very often, post retirement, we find the home loan we had availed decade-and-a-half ago is a bit of an albatross around our necks. So, a very clear and unambiguous decision needs to be taken to either create an EMI servicing mechanism from post-retirement revenues or to set aside enough corpus to liquidate such large obligations concurrent to superannuation. And, if familial conditions permit, a reverse mortgage facility could be a good option to restore ongoing liquidity, especially in the later stages of the second innings.

The most challenging decisions are about the share of the wallet. How do you go about allocating savings and investments across multiple metrics—security investments like life and health insurance, tax savings, risk hedging or pure return-generating ones? You need to be clear about how much risk you want to take; what should be the split between debt and equity, not only from the risk point of view but also from fixed income considerations. In my opinion, for those who aren’t too investment savvy or do not follow the markets intimately, it makes a lot of sense to align with a wealth advisory service, even if they are the basic ones offered by most private sector banks and other private advisors. These entities have a very decent profiling tool, which is a good starting point for you to determine what sort of investments is commensurate with your individual psyche. A healthy proportion of liquid savings, with banks, is important to ensure a proper risk-reward distribution and also gives a quick access to emergency funds.

Overall, it is important to have a reasonable target about your future plans. For many of us, the aim is to relax, indulge in our hobbies and passions and not get caught up in executive responsibilities, while keeping the hearth warm. After all, we have earned every bit of it.

The author is an Independent Consultant – Banking and Financial Services