Summary of this article
· Focus on capital safety, especially for retirees without pensions
· Establish a regular income flow to manage recurring expenses
· Diversify investments and seek professional financial advice
Navratri is considered an auspicious time to start something new. Many people buy precious metals, especially gold, or purchase a vehicle or book a property. The festive fervour, special discounts, attractive offers on buying an additional product, packaged gift items, and much more, encourage people to spend even on what they don’t need, derailing their financial planning. Although the elderly don’t get carried away in spending on unnecessary objects, unlike their younger counterparts, they seldom act as squanderer. However, here are the nine essentials for seniors to keep in mind during this Navratri and festive season ahead, to keep finances on track.
Festive Benefits: The festive season nowadays has turned into a shopping season with companies offering special discounts, buy one get one type offers, promotional offers on loans, and much more. Though seniors usually don’t fall for them, there may be some useful offers. So, keep an eye open for such offers; for instance, special FD rates by banks, discounts on travel, etc.
Capital Safety First: Capital safety should be the primary focus after retirement, especially for those who don’t have the security of a pension. The idea is not to abandon investing post-retirement; instead, invest in instruments that can assure inflation-beating returns.
Regular Income: A regular income flow after retirement is necessary to meet the recurring expenses. At no point should one forget to invest money in creating sources that can generate a regular cash flow. Government schemes, such as the Senior Citizens Savings Scheme (SCSS) and the post office monthly income scheme, are a few of them.
Inflation-Beating Returns: A regular source of income can help in meeting regular expenses, but for additional expenses such as healthcare, health insurance, travel, family occasions, festivals, and other miscellaneous expenses, there should be some extra savings. For this, money should be invested in instruments that can provide a real return, which means the returns need to be higher than the inflation rate. This is because inflation erodes the value of money and reduces its purchasing power.
Maintain Liquidity And An Emergency Fund: Creating a retirement corpus for financial independence is one thing, but having the right balance of movable, immovable, and liquid assets is another. Owning a house without having enough liquid funds to use in cases of exigency can put an older adult in a tough spot when the need arises. Always set aside a portion of money for emergency use. However, it does not mean keeping money at home; it is in highly liquid instruments, like sweep-in fixed deposits.
Tax Efficiency: Savings tax by investing in a set of stipulated instruments is a well-known idea when it comes to cutting down money outflow. Although the new tax regime does not offer much freedom to save tax by investing money, one can plan the withdrawal from those instruments where a certain limit is tax-exempt. For example, an annual exemption of Rs 1.25 lakh on long-term capital gain from equity-oriented mutual funds and listed equity shares can be used for expenses or for re-investment without incurring tax.
Diversify Investments: Diversification is the simplest strategy to minimise risk, but it shouldn’t only be among different asset classes but also within one asset class, and even in the low-risk category. For instance, one may have a mix of FDs, SCSS, and debt funds to balance return and risk.
Keep It Simple: Even while diversifying the portfolio, do not make it complex with multiple holdings, making monitoring the performance difficult. The idea is to create a portfolio that is simple and easy to monitor. Consolidating savings accounts and FDs in different banks to a few could be easier to check.
Seek Advice: There is no harm in seeking advice for retirement planning. However, find a certified expert for advice instead of just depending on your friends and family. In today’s time, amid a plethora of instruments available, anyone can start investing randomly, but as a retiree, when the cash flow is limited, it would be better to seek advice from registered advisors to create a balanced portfolio.
With Navratri, the festive fervour is in full swing, so enjoy but stay rooted to the essentials of financial planning.
