Behavioural biases that damage your investments!

As your hectic work life comes to a close and your retirement years begin, you need to have great peace of mind to enjoy those golden years. Many would have saved and invested in bank deposits, stocks, mutual funds and bonds and created a big retirement corpus along with investments in insurance policies to take care of medical needs. There would be a large provident fund corpus that has accumulated over the years.

But are your finances all scattered and you are already finding it difficult to keep track? Many retirees are not organised in their finances as a result of which they are not able to enjoy their wealth fully and also create problems for those who would inherit the accumulations.

Here are 5 money-related things you need to do as you approach your retirement.

Start consolidating

Your work life may have forced you to open many bank accounts and you have money lying in each. You would have invested in many instruments and some of them are still in physical form. You must start to consolidate all your bank accounts, FDs and investments and try and make them online as far as possible so that you have an easier picture of your overall finances. “The lesser is better during retirement. It is best to close irrelevant bank accounts and sell properties that you are not able to manage,” Kartik Jhaveri, Director, Investment Services, Transcend Capital, said.

Avoid fresh debts

Do not add to your debt burden as you near retirement unless it is totally unavoidable. In fact, you should try to repay all debts as you enter your golden years and be debt-free. “It is important to stay away from debt in old age. Closing all kinds of loans, including settling credit card bills in time, is very important at this phase as this will unnecessarily create burden at this phase of life leading to the financial crisis,” Anil Rego, Founder and CEO, Right Horizons, said.

Inform your family

While consolidating your finances, you must ensure that some trusted family members are aware of what you have. There are thousands of crores lying in unclaimed bank accounts, insurance policies and provident fund accounts and the likes. This is because many times the breadwinner does not inform those who would be inheriting the finances about what all one has and where those are lying.

Write a Will

Along with informing the family members of the possessions, you must write a Will stating how the wealth needs to be distributed among them when you are not around. If one dies intestate, there is a huge possibility of friction within your family on the wealth. If you have a sizable amount of assets it might be best to take the help of a specialized person to draft your Will.

Be judicious in gifting

As you grow old, you might want to give away part of your wealth to your loved ones. However, you must be judicious and calibrated about it. Do keep the lion’s share with you. You do not know how long you would live and there should be enough money with you to see you through these years without depending on anybody. “Some retirees prematurely gift their wealth to their children, which can potentially adversely impact them. Be sensible and measured about gifting during one’s lifetime,” Suresh Sadagopan, Founder, Ladder7 Financial Advisories, said.