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Retirement Investment Strategy

A retirement investment plan is a mix of products like
small saving schemes, mutual funds and reverse
mortgage, and can assure a steady monthly income for
senior citizens.
With life expectancy going up, post-retirement life is
longer than what it used to be. According to the World
Bank, life expectancy in India has gone up from 53-54
years in 1980 to 67-70 years in 2015. Living longer has a
direct impact on financial preparedness after retirement.
While a lot of people have a pension to live off, inflation
and the prospect of living for another 20-25 years after
retirement can be expensive. The main need at this stage
is a regular income and for that pension and other savings
need to be channelized while keeping in mind major
expenses like sudden medical emergencies.
Here are a few suggestions to ensure the best possible
decisions with retirement savings:

Understand the time horizon
The current age and expected retirement age create the
initial groundwork for an effective retirement strategy.
The longer the gap between the present and retirement,
higher the level of risk an investment portfolio can

withstand. If there are 30-plus years to go for retirement,
majority of assets should be in high-risk investments like
stocks. Stocks have historically outperformed other
securities such as bonds over long periods. Additionally,
the returns should outpace inflation to maintain
purchasing power during retirement.
Determine retirement spending needs
Having realistic expectations about post-retirement
spending habits will help define the required size of a
portfolio. Most people believe that after retirement their
annual spending will amount to only 70-80% of what they
spent previously. Such an assumption is often unrealistic,
especially if medical expenses occur suddenly. People
also spend the first couple of years splurging on travel or
other bucket-list goals as they have more time to travel,
go sightseeing, shop or engage in other expensive
activities.
Assess risk tolerance versus investment goals
Whether it is an individual or professional money
managers in charge of investment decisions, a proper
portfolio allocation that balances the concerns of risk
aversion and return objectives is the most important step
in retirement planning.

Stay on top of estate planning
Estate planning is another key step in a well-rounded
retirement plan, and each aspect requires the expertise of
professionals like lawyers and accountants. Life insurance
is also an important part of an estate plan and the
retirement-planning process. Having a proper estate plan
and life insurance coverage ensures that assets are
distributed in a manner that loved ones will not
experience financial hardship following the person’s
death.
Fixed deposits
A bank fixed deposit is another popular choice with the
retired. The safety and fixed returns go well, and the ease
of operation makes it a reliable avenue. However, interest
rate over the last few years has been falling even though
senior citizens get an extra 0.25-0.5 per cent per annum,
depending on the bank.
Senior citizens’ saving scheme
Probably the first choice of a lot of retired people, a senior
citizens’ saving scheme can be procured from a post
office or bank by anyone above 60. These schemes have a
five-year tenure and can be extended by three years once

the scheme matures. Currently, such schemes offer the
highest post-tax returns among all comparable fixed
income taxable products, are eligible for tax benefits
under Section 80C and allow premature withdrawals.

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