How to deal with your retirement plan risks?

Living life is just like driving a car. We all need to gear up in every walk of life and ensure that we build enough financial security to live a happy and satisfied life. When you are young you’re at the top gear racing along with the time, enjoy yourself with no worries of the future. Once you get career oriented and marry you push your life to fourth or third gear and start caring to drive safely so that your family remains safe who is dependent on you. While the time you turn old it is your retirement age and you reduce your pace and almost come down to the first gear of life, cautious for the rest of the living moments. When you retire, you will need to shift gear from saving money to managing the income from those savings. The challenge lies in building enough retirement corpus to cover your needs, without risking your long-term goals.

Old days are mostly relying solely on retirement plans and social security to meet financial needs during that phase of life. As you retire from your job, employer provided health coverage will also not be available for many people. And with the growing lifestyle improvement, health awareness etc. people are living longer and carrying more debt than in previous generations.

Therefore, it is important to develop a personal retirement plan strategy that will generate the income to meet you daily requirements and fulfill your dreams during the dusking days of life.

In India, the era has begun where people are adapting more of the nuclear family structure. There are high chances that they won’t be able to forget your old age requirements. Therefore, it is advisable to build your own retirement plan that will give you the happiness of accomplishing your dreams and pride in living with dignity.

How to do it? The article gives you an insight on 5 key retirement plan risks which needs to be dealt properly while planning:

Longevity

Although it is a blessing to live long because of improved healthcare, better amenities, growing lifestyle changes etc. but it could also increase your expenses in retirement. The average life expectancy for a 65-year-old mean your retirement could last 20 years or more. Therefore, your planning parameters are slowly shifting into the house of 80-90s.

Inflation

Inflation is the major concern across all sectors. While structuring your retirement plans your annual income needs could be more than double over the course of your retirement. For eg. Let us say you need Rs 50,000/- a year in retirement. In 25-30 years, if inflation averages 2.5% a year, you may need more than 100,000 a year to maintain the same standard of living.

Healthcare costs

When you retire from your job, employer provided health coverage is not available. And with the ailing age your healthcare can be one of the biggest expenses in retirement. Therefore, you need to keep this important factor in mind and create your retirement plan accordingly. 

Investment risks

Markets are volatile. If everything goes well nothing good like it. But if the market is poor then you will have to bear the cost. Poor market performance early in your retirement can significantly impact how long your savings will last. Strategic fund allocation, fund switching when required, taking a proper call on aggressive or debt fund investment can help, and options such as annuities can create retirement income that is not exposed to market risk.

Taxes

Increases in taxes, new types of taxes, evolving healthcare reform, or changes in programs like social security, medicare, and Medicaid can have a significant impact on your income in retirement. Though shifts in tax structures are out of your control, you can still help yourself by creating a strategy for your personal situation.

By taking a realistic approach for your retirement plan and accounting for some of these risk factors mentioned you can help ensure that your retirement life is not only happy but can be lived with pride & dignity.