Falling short of retirement corpus?

As a part of FPGI collaboration, I recently wrote an article for Janmabhoomi Pravasi, a Gujarati newspaper. This article is regarding managing the estimated shortfall in retirement corpus. Please click here to download Janmabhoomi Pravasi e-paper. Please select date as Monday, 27-May-2013 and Page no. as 2. 

The article is published on the bottom right side. Since the article is in Gujarati, the English version is as follows. Please note that the two versions have slight differences related to editing.

With rising inflation, Retirement planning is gaining focus in India. Let us see how you can plan for your retirement. The steps we recommend are as follows:

1. Baseline your current expenses under various categories like Household, Lifestyle, Travel, Insurance, Dependents and EMIs etc. 
   
2. Now estimate what expenses you would need in the retirement period. As an example, Health Care expenses are likely to be significantly higher and EMI Payout is likely to go away. 
   
3. Add inflation factor between now and when you retire.
   
4. Decide your retirement age. Normally, Age of 58 is a decent assumption. 
   
5. We recommend Life Expectancy of 85 Years of Age. This can higher or lower depending on your situation. 
   

With these inputs you can calculate your Retirement Corpus with the help of Retirement Calculators available on various personal finance web sites, use Formulas in Excel or ask your Financial Planner.

Now, if you assess that with your current and planned retirement savings, you are likely to have a shortfall, here is what you can consider:

1. Review your current expense levels & expected changes in retirement period. See if there is anything that can be optimized. 
   
2. Re-look at your Retirement age of 58 Years and see if you can work bit longer. Consider part time working for a longer age.
   
3. Increase your retirement savings between now and your retirement age.
   
4. Invest more of your Retirement Savings towards Equity through Mutual Funds. 
   
5. Your post retirement corpus can also be partially invested in Equity through Mutual Funds. 
   
6. Review your other Financial Goals and prioritize Retirement Savings. For example, if you planned to send your Daughter for US Studies, consider part funding by you and the rest through a bank loan by her. This will allow you to invest more for your retirement. 
   
7. See if you can build regular income through Rentals from 2nd Home etc. We suggest you do not completely depend upon such rental income for your Retirement. 
   
8. See if you have any inheritance that you have not factored so far. 
   
9. Consider staying in a Joint Family with your Son. This will mean fewer expenses for both yourself and your son. 
   
10. Consider Reverse Mortgage of your House as a backup plan.
    

Please note that you should also keep in mind your Risk Tolerance while making any investment decisions. Doing a Risk Profile will let you know your Risk Tolerance. While you may like to take an aggressive investment approach to meet your Financial Goals or secure Retirements, you must consider your ability to withstand the adverse financial outcomes. For doing your Risk Profiling, you can consult a Financial Planner or use resources available on Personal Finance websites like Moneycontrol.com

Regards,
Rohit

Credits:

1. Publication: Janambhoomi Group
   
2. Collaboration: Financial Planner's Guild, India

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