RETIRING SOON or Restarting Your Re-tyred Life?

Hey!! Feeling young at 60? I know you are surprised at your retirement transpiring too early but in reality, it’s time for your exit paving the way for others to take charge now!! Just relax and feel the pulse of my heart reverberating wishes on your well-deserved retirement. Some of you must be feeling more relaxed and secured having accomplished all your life goals in a phased manner. Intrusive thoughts and nervousness must be creeping in the minds of a few others at the prospects of their retirement.

This post is dedicated to you guys who could not plan their retirement during the early part of life for reasons beyond comprehension. Hope the subject will be absorbing for you to comprehend and follow to spruce up your re-tyred life.

Globally, all Financial Consultants recommend starting the planning of personal finances at the age of 25 to 30 years. Ideally, this is the age group when you should have started saving and planning for all your financial goals. However, in our country where an average Indian starts planning for retirement only after crossing the age of 50, you might be late but the game is not over yet. Maybe the retirement planning escaped your attention due to other priorities, social obligations or, living with your current lifestyle? You can’t retrieve those lost moments but certainly, you can spruce up your future with some purpose even now.

Hopefully, your perquisites like, PF/Gratuity/Leave Encashment and some other entitlements have already been processed by your employer. Your savings and receivable funds put together may heap up into a healthy corpus. Please see that all your debts are cleared before starting planning further. Don’t carry forward any such liability with you to avoid any untoward situation.

Further, the value of your money subject to inflation is likely to depreciate every year. The average inflation rate in India hovers around 6.5%, you need to earn interest or generate income on your money at least a net of 7% to neutralise the effect of this invisible enemy. You must ensure that this money is allocated to diverse securities/investments so that they continue producing passive income for you. Restrain yourself from spending lavishly on avoidable expenses.

By natural instinct, you are going to feel financially insecure after retirement. You may be tempted to keep maximum balances in your bank savings account as an emergency fund. Interest earning on such deposits is being 3% only, you may not be able to grow your funds as per your needs. There is every possibility of any friends/relative suddenly seeking financial help which you may not resist. In both cases, your risk and potential loss of money can’t be ruled out.

I will discuss the allocation of the money in the latter part of this post. Let’s find out the opportunities available for you to keep busy and earning portfolio income to supplement the limited resources.

The possibility of getting hired after retirement has always been remote but the prevailing pandemic conditions have made the task more difficult. Social distancing norms as prescribed by the administration worldwide are more inconvenient and painful for the senior citizens. The virus is more threatening for elderly people aged 60 years and above due to their weakening immunity. The chances of getting a good break look bleak under the given circumstances.

Working from Home has come as a blessing in disguise for many companies and individuals. Wherever feasible, the companies have allowed their workforce to work from Home making it a win-win situation for all. Why don’t you try the undernoted resources for keeping yourself busy and earning a bit while sitting safely at home?

Freelancer Jobs: Friends, some of you must have acquired expertise in Financial Markets, IT and Software, Computing, Data entry, Tuition work, Legal, content writing skills, or any other specialization working for more than 30 years. You can explore opportunities for getting freelance jobs sitting at your home.

There are hundreds of websites offering you freelance jobs. Some of these are, Upwork, Freelancer, Fiverr, Toptal, and Guru. You can register with these companies and start earning right away. No formal education is required as the only pre-requisite qualification is your talent and expertise.

The payments are secured and guaranteed as these websites take a cut out of your income. Earning may range from 5$ to 100$ per hour depending upon your proficiency, efficiency, and competence.

Stock Market: If you have prior experience of conducting the business of share trading in the stock market or you have enough patience and perseverance, you can also look for trading in the stock markets. This will not only keep you busy for a few hours daily but also help in generating a passive income. Intraday trading is beyond your scope and should not be undertaken. This product has been devised for proficient investors with more risk appetite and possessing professional skills.

However, you can identify a few stocks by using due diligence/normal prudence and go for positional trading. Positional trading allows leverage of a few days and you can decide your trade accordingly. This is a high yield lucrative business space if you can invest wisely after thorough research. Stock markets are not open on Saturdays and Sundays that allows you to trade for 20 days in a month.

Coming back to the management of your funds and life after retirement, you need to sit down and jot down the income and expenditure details accruing every month. There is no need to create an emergency fund as most of the Bank FDR’s or other investments can be encashed prematurely these days. You need only two months of living expenses and Rs.100,000/- for any incidental expenditure required to be incurred during the odd hours.

Since life expectancy has increased by more than 20 years, you need to know that health care is going to be the biggest issue now. Most employers have a group insurance scheme in force for their employees. You need to confirm whether this will continue after retirement or not. Health insurance is not only costly after 60 years of age but comes with lots of strings attached to it.

In case the existing insurance cover provided by the employer can’t be taken forward, you must identify a good health policy for you under family floater. Go for the plan which has positive reviews from the customers about the hassle-free settlement of claim cases backed up with the best customer service. No frivolous condition laid down by the issuing company be accepted in the Policy lest a genuine claim is declined in future.

Let me list a road map for you to manage your money with an eye on preserving your capital by generating enough passive income for the living expenses regularly:

1. SCSS(Senior Citizens Saving Scheme): With a sovereign guarantee, this scheme looks attractive for those retiring from active service. The Senior citizen’s savings scheme is open only to senior citizens aged 60 years and above. You need to open this account within one month of your retirement. The upper limit of deposit in this scheme per account is 15 lac but you can open more than one account also. Initially, any deposit made under this scheme matures after five years However, it can be renewed further for three years. The interest rate is decided every quarter but once invested, you get a fixed return for five years. The present rate of interest is 8.6% per annum. The interest amount is taxable under the Income Tax Act. However, You can get premature payment also.
2. Mutual Funds: Ordinarily Mutual Funds in India provide 10 to 13% returns on various MF schemes. You can consider this option by investing a portion of your funds in Mutuals Fund schemes where fund allocation is 100% in equity. This is risky but the most rewarding portfolio for investments on longer horizons. There is no lock-in period and you can exit as and when you need the funds. Just a few clicks on your computer and the proceeds get credited to your Bank account within a week’s time. There is no capital gain tax on MF’s investing in equity only. However, the maximum permissible amount of capital gain is Rs.100,000 only
3. Bank FDR: Though interest rates have come down considerably, the Bank FD still remains a choice for many as you get a special interest for senior citizens also. These instruments can be encashed online at any time. Gone are the days when you had to visit the Bank branch for canceling and encashment of your FD prematurely. The payment gets credited to your Bank account immediately. Except for Tax saving FDR which has a lock-in period, all other FD’s are easily payable before maturity.
4. POMIS(Post Office Monthly Income Scheme): Maximum of three joint account holders with 4.5 lac each for individuals is permissible in this scheme. The maximum limit for minor accounts is Rs. 3 Lakh. The minimum amount which can be invested is Rs. 1,500 for any individual. Interest is revised regularly on a quarterly basis. However, presently the post office is paying an interest rate of 7.8% to their customers. Interest is fully taxable but no TDS is deducted at source. Interest is credited to your post office savings account every month.
5. Tax-Free Bonds: Another safe and better yielding option for retired people is an investment in Tax-Free Bonds issued by the Govt. of India. These are long term securities offering interest rates as high as 8% and no tax is deductible at source as interest earnings are completely tax-free. Maturity ranges from 10 to 20 years as such it is advisable for those investors who can spare money for longer periods. You can buy these bonds through your Demat account or in physical form as per your convenience. These are risk-free investments due to sovereign guarantee,

Besides, all retiring people will appreciate that Income Tax liabilities are going to remain the same except for a small exemption for senior citizens in the country. Each and every penny is going to be accounted for payment of income tax. Although, there is no penalty for late payment of income tax by senior citizens in India you must ensure paying advance income tax out of your pension or other resources. Filing of ITR is mandatory for all senior citizens and must be taken care of for timely submission every year.

Happy reading friends! Stay Safe Stay Connected

Disclaimer: The material and information contained on this website/Blog is for general purposes only. You should not rely upon the material or information on the website as a basis for making any business, legal or any other decisions. Any reliance you place on such material is strictly at your own risk and responsibility

Retirement:Anxious Moments

Some people have misconceptions about the basic facts of retirement and life thereafter. However, these misunderstandings can lead to the difference between a retirement you had wished for and a retirement you settled for. As the date of retirement draws closer in developing countries like India, anxiety is writ large on the faces of prospective retirees. Some unfinished work like children’s Education/Marriage or outstanding liabilities makes the life tough for those who did not plan their goals in advance.

Barring the employees working in Govt departments/PSU’s or a few other fortunate, who get Pension and family pension to live their retired life peacefully, we don’t find such privilege to the private sector workforce. Most of them working in unorganized private sector hardly get anything worth living after their retirement.

The ratio of Govt to Private sector employees is 100 to less than1.3 i.e 0.1% in India. Pension in the private sector is either not available or not enough for sustenance. These less privilleged ones have to fend for themselves or depend on their children.

Another section of people working in the orgnized private sector gets a few benefits like gratuity/PF etc. The lump-sum amount they receive as gratuity/PF doesn’t get enough interest or passive income and erosion of capital starts through regular withdrawals for meeting day to day expenses.

Let’s come to various misconceptions and lack of initiatives for planning a relaxed and happy retirement by the employees in India

Misconceptions: All Employees

1. Most people think that their children will support them in retirement. Apparently, Such expectations are not wrong as the traditional Indian societal structure imbibes this culture for centuries. But the time has gone when the whole family pooled its resources and helped themselves in living their life comfortably. The cost of education/lifestyle/medical/luxuries has skyrocketed these days. Parents are keener to ensure all-round growth of their kids and spend a lot on their education/sports/hobbies besides planning for their own retirement. Children are hardly left with any surplus money to feed their retired parents. However, there are a few fortunate who find a regular stream of support from their children
2. They believe that their near and dear ones will come to help in case of need. This again is a misconception as no one has the time or spare money to help others. Everybody is tight with his own budget
3. Many think to start a business after retirement forgetting that they lack the basic requirements of being a successful businessman. Different attitude and temperament is required for running a successful business. They have neither the experience nor the shockers to absorb losses which are eminent to happen in any business during the initial years of operations. There is every possibility of losing money. received as retiral benefits
4. Having seen the potential of stock markets and finding a few friends talking about shares, there is an urge to fall prey to earn easy money. The Stock market is not everybody’s cup of tea and speculative trading/investment on the recommendations of friends/ Youtube channel/News Channel/Internet will bring miseries only.
5. Although there are very few chances of getting a suitable job after retirement but some retiring people think that there are a lot of opportunities for experienced professionals in the market.

How Employees think about retirement:

1. They don’t anticipate the future financial needs like urgent medical attention
2. Ironically a few think of living in present never bothering for the future as if it is not going to happen
3. They are happy living comfortably on day to day expenses setting the stage for imminent discomforts in future
4. No long term planning when it was required
5. They contemplate renting out a part of their accommodation if need be. A very casual approach
6. They may sell a part of the equity of their house to meet emergent needs which again is an option hardly considered due to various constraints

What Employees should have done:

1. Should have Visualised plan how they would like to live a retired life
2. Reach out for help from friends and professionals to plan for various goals of life
3. They had three opportunities to initiate a retirement plan. First between 25 to 35 years, Secondly 35 to 45 years, Thirdly 46 yrs onwards. It is better to start late than never irrespective of income
4. They should have Insurance plans in place like Term Insurance which has a very low premium, Health Insurance to safeguard against medical urgencies, thirdly Income Protection plan
5. Think differently to explore passions and rebuild the relationship which they could not do while working for 40 years,
6. It’s good to think of settling first in life and then plan family but you need to plan in such a way that your kids complete their education and possibly get married before your retirement
7. All categories of employees must follow the Budget Rule 30:50:20 meticulously and start planning from the first salary.

What the Retiring Employees should do NOW:

1. with an advanced medical system and a healthy lifestyle, the life span has increased by a few years. There is every likelihood of living for more than 20 years after retirement. They should get a family floater medical insurance covering both husband and wife for a minimum of 10 lakh insurance cover which is essential to meet emergency medical conditions
2. They should not spend lavishly and must preserve the money received as retiral benefits. Invest wisely to earn some extra passive income
3. Firstly building their careers and then bringing up their families, most people remain preoccupied hardly finding time to keep in touch with their relatives/friends and other close relations. This is the time to revive those relations and participate in family get-togethers regularly.

Friends, Can you share any experiences on the subject as this particular scenario brings inconveniences for those who fail to plan their life goals well in advance