Most important things to take care of before you retire

If you are thinking of retiring anytime soon, it is prudent that you start putting your ship in order. Planning and organizing your retirement is one of the most rewarding tasks you can do for self.

December 20, 2022 • Estimated Reading Time: 4 minutes

If you are thinking of retiring anytime soon, it is prudent that you start putting your ship in order. Planning and organizing your retirement is one of the most rewarding tasks you can do for yourself.

Many of us feel jittery about retirement when we reach 45-50 years of age. This is because, during this time, we have the highest cash outflows, heavy work schedules and routine personal life.

So here is a 8 point checklist which you can keep it ready (and update it periodically) to not worry on the retirement day:

1. Picture your Retirement:

As they say, “a picture is worth a thousand words.” While your retirement picture may only exist in your mind at this point, it is your first step in planning for retirement. Find answers to the following questions:

· When do you want to retire? In one, two, five, ten years?

· How do you want to retire? Start with part-time work? Stop all work?

· What are your retirement goals? Travel the world? Start a pet project?

2. Prepare a Retirement budget:

This starts with answering the question: “How much money will I need in retirement?” There are many rules of thumb. From a retirement pot that meets a 7% withdrawal rate to 70% of your annual pre-retirement income, or a total of your annual income multiplied by multiples of 10 to 14.

3. Eliminate Debt:

Plan to retire with zero (or very little) debt. Becoming debt-free means you have one less thing to worry about in retirement.

4. Review your investment portfolio:

Review the assets you have in your investment accounts – Stocks, Mutual Funds, FDs, EPF/PPF and others.

· Is your portfolio adequately diversified?

· In retirement, you want a combination of growth and safety, and depending on your expected sources of income, a conservative to the balanced portfolio may help you sleep better at night.

5. Think about taxes:

Consider how you can lower taxes on your taxable income in retirement.

Think about:

· Income Splitting: You can split income with a spouse that lowers your total family tax liability.

· Tax-free instruments: Evaluate options for the tax-free income of about 5-7%

· Factoring TDS from income: Factor in the amount TDS that will be deducted and provide for the balance tax liability to avoid last minute (31st July) sudden hit for tax payment.

6. Think about housing:

Where do you plan to live?

· Do you plan to continue living in your current residence in retirement?

· Do you plan to depend on your children for living with them?

· Have you factored in a scenario of any dispute and kept the fall back arrangement?

· Have you taken home insurance for any damage to your home during natural calamity?

7. Examine your Health Insurance:

Any sudden expense of Rs. 10-25 lakhs for a medical emergency could be detrimental to your overall financial plan unless you have provided for it. It is better to pay about Rs. 40-60K insurance premium for any ailments. If you are betting life without ailment in retirement, All the Best!

8. Develop an estate plan:

Have you made a will? Does it need updating? Prepare a will that clearly states how you want your estate to be dispersed after you die. This will save your family a lot of stress and ensure that your wishes are respected.

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