40After40 Retirement Expo: Right Strategies Are Key To Financial Freedom For Lifetime, Says K.S. Rao

Given the higher life expectancy in India today with improved medical care, Indians must prepare themselves for financial security post-retirement by ensuring stable income streams, emphasised K.S. Rao, head of investor education and distribution development at Aditya Birla Sun Life AMC Ltd, during a presentation at Outlook Money’s 40After40 Retirement Expo at Pragati Maidan in New Delhi on the final day of the two-day event on Saturday.

Rao elaborated on strategies to ensure sustainable income streams during retirement, from the accumulation and preservation phases to the distribution phase, where the bucket system can be an effective tool. He cautioned the audience of the changing Indian family systems, from joint to nuclear families, urbanisation and increasing life expectancy, a new reality which calls for a relook into how we save and invest money and plan for retirement. Rao said, “Even a 100-year life may become the new reality soon, so retirement planning should be taken more seriously.”

The skyrocketing healthcare costs and inflation pose a major challenge for most people in managing finances in old age. “Life expectancy has reached 70.8 years in 2022, up from 32 in 1947. CPI (Consumer Price Index) is currently averaging at 7 per cent,” Rao added.

Rao warned, “Your child cannot be your retirement plan or emergency fund.” During the accumulation stage, Rao said, one can use the systematic investment plan (SIP) to stay invested perpetually. In the second or preservation stage, one should transition systematically to lesser-risk funds, which means transitioning from higher-risk assets like equities to lesser-risk assets like debt instruments. In the last or distribution phase, they should adopt systematic withdrawal plans (SWPs) to ensure the money is reinvested for systematic withdrawals with modest returns that can last them for a lifetime

Retirement Goals                       

Rao encouraged senior citizens to broaden their horizon of retirement goals to include travel, hobbies, health, charity, and spending time with family beyond stable income.

Rao stressed it’s time to look at retirement with a new perspective that includes rejuvenation, good health and financial independence, emphasising that purpose and social connections would help navigate an individual’s retirement journey easily. “Aging can happen automatically. But growing is when you are adding life to your age. You are growing in youthfulness. Three Fs can make a lot of difference—friends, family and finances,” Rao said.

According to Rao, the last 30 years of life should focus on purpose and leaving a good legacy, which can only be achieved through economic stability.

Rao used the acronym GOLD to illustrate focus areas of retirement planning—G stands for gainfully engaged, O for optimally invested, L for lifestyle, and D for discipline. He said smart budgeting is crucial to manage money effectively and avoid financial pitfalls. He also discussed the bucket system, where people invest based on goals three years away or five or over seven years away. The bucket system allocates funds based on time horizon and risk tolerance, ensuring safety, income, and growth over different timeframes.