A reader says, “I was recently introduced to freefincal by a colleague. I am 48 and did not plan anything for my retirement. After reading your articles and understanding how important retirement planning is, I feel like a failure. What can I do? Is there any hope left for me?”
Please don’t despair. The past is past. No point thinking about it. Let us get into what can be done now.
1. Take care of your health. Time and health constitute true wealth. So, there is little time left to invest and take on some risk, but you have to hang on to your wealth. Eat better, sleep better, live better. Get periodic tests done, etc. Prevention is the best cure. If you need to work for a few more years, you need your health.
2. Evaluate your expenses. Determine the minimum funds necessary to live a lifestyle as close as possible to your current one. Use an inflation of at least
3. Evaluate your current investments. Find your current total retirement corpus. Tag some of your investment to retirement and try not to change tags in future.
🔥Secure your future with our Robo-advisory tool trusted by over 3,500 investors and advisors. From effortless retirement planning to funding your children’s biggest dreams, turn your financial goals into reality. 🔥
Subscribe for money management solutions via email! (Link takes you to our email sign-up form) Join 32,000+ readers in our community.
👉 New Tool Alert! NaviPlan: A Privacy-Focused Multi-asset Tracker and Goal Planner 👈
4. Evaluate your retirement benefits. You should be able to get a ballpark estimate of benefits like gratuity, leave encashment, etc., as applicable. This could be a sizeable chunk. Add these to your corpus.
5. Evaluate your post-retirement income sources. These could be an employer pension or annuity, rental income, dividends, etc. These will significantly contribute to handling expenses after retirement.
If you want to use a calculator that considers three income sources and retirement benefits with customisable assumptions, you can consider the freefincal robo advisor tool.
6. Estimate your initial withdrawal rate. This is defined as annual expenses in the first year of retirement dividend by the total corpus available. You can use a 4-5% inflation and a reasonable rate of return on your investments for this.
If the initial withdrawal rate is higher than 4.5%, then a pension should be the most important component of your portfolio, and you probably need to find work after retirement. See: Is it Possible to Gauge Post-Retirement Equity Exposure without a Calculator?
7. Plan your second career today! List your skills that could help others, list your passions and find an overlap to turn your skills into income.
Don’t lose heart. With some adjustments in your calculations, lifestyle and plans, you can make it work. It won’t be easy, but then what is?! Forget the past and act now!