Summary of this article
With retirement just one to two years away, start de-risking your portfolio.
Prioritise savings over spending, and ensure that your returns beat inflation.
Repay the debts, reassess health insurance, and prepare a monthly withdrawal plan aligned with expenses and long-term retirement goals.
When you are 1-2 years away from retirement, your financial fitness should be at its top level. You must take all the measures to eliminate factors that can negatively impact your financial health after your retirement. Here are some important steps you can take at this stage to help maintain good financial health when you retire.
Make Your Investment Portfolio Completely Risk Free
Imagine what will happen if you lose your retirement corpus when you are only a year or two away from your retirement? You can’t recover from such a big financial setback close to your retirement. So, it’s better to avoid all types of financial risk when you are less than two years away from your retirement. By now, you should have completely shifted your investment portfolio to a low-risk asset class and focus on less spending, more saving, and ensuring a return on investment that is higher than the prevailing inflation rate.
Become Debt-Free
As a new chapter is about to begin in your life in a few years, you must close your remaining debts one by one. For example, if you have a car loan, a personal loan, or a home loan, then try to close them now. You may continue with some of your loans even after your retirement, provided you have a plan for their repayment without impacting your retirement goals.
Update Your Health Insurance Needs
It’s time to get your complete health check-up done. Depending on your health status, you should evaluate your health insurance needs. If you have a chance of developing a certain health issue in the coming years, then accordingly you should make changes in your existing health policy, such as increasing the cover size, getting an appropriate rider, or buying a super-top-up policy for greater coverage.
Make Your Money Withdrawal Plan
How much money would you be withdrawing every month after you retire? You should be ready with your exact retirement withdrawal plan. Estimate your corpus in hand after adjusting expenses towards retirement readiness and key initial expenses like shifting to a new location or new home, repair and maintenance of your home, etc., and choose an appropriate investment product that offers adequate withdrawal to match your spending needs. You need to plan a withdrawal for meeting your regular financial needs as well as to meet your short- and long-term retirement goals.
As you get closer to your retirement day, you may start consulting your financial planner or advisor more frequently to discuss the requisite financial adjustments and to avoid mistakes at the last moment.
The author is an independent financial journalist
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
