Retiring amid Covid outbreak? Here’s a checklist for you

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The day you retire, will get etched in your memories for long. After all, it’s the end of one long innings and the beginning of an altogether new one. But, retiring in the background of a pandemic may come with its own challenges. Do not make the mistake of dropping your guard in your second innings especially when it comes to financial matters.

Just in case you are retiring this year, you need to put a plan in place regarding your finances well before your last working day. The day you retire ought to be simply the day when you retire from the concerns of everyday money matters. For those approaching their retirement, it will be an entirely different world once they hang-up their boots.

Whatever you wish to do in your post-retirement life, it must be without stressing over income to support the brilliant time of your life. Regardless of whether you have quite recently retired or retiring soon, your retirement funds should be deployed such that the non-earning period goes through easily even without relying upon the regular salary income.

Pension Needs

With increasing life expectancy, your non-earning period will be practically that of 30-40 years, equivalent to the period that you spent acquiring income. Hence, you need to design your post-retirement life reasonably to make each rupee procured during working life help you have a cheerful survival after retirement. In fact, you also need to plan for the pension needs of your spouse as women tend to live longer than men.

Health coverage

The medical attention is generally more pronounced after one retires. Make sure you have sufficient health care coverage to meet rising medical expenses. Covid-19 led hospitalisation has shown that hospital bills can run into a few lakhs. Make sure you have a regular individual health insurance plan with adequate coverage before you turn 65. Post that age, you may have to buy a senior citizen health insurance plan, which comes with lots of restrictions.

If you already have a health insurance plan, check if the coverage is adequate. If required, you may buy top-up or super top up health covers to enhance coverage. Health insurance plans come with lifetime renewability and hence ensure you keep renewing plans for self and spouse on a regular basis.

Investment portfolio

When it comes to creating a post retirement investment portfolio, you need to be extra cautious. What you need to ensure that your retirement kitty provides a regular income yet grows over time to keep pace with inflation. While security, safety, liquidity and returns will stay at the center, do not ignore tax. It’s better to choose tax-efficient investments that come with liquidity as well. Besides debt funds, you may consider Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office Monthly Income Scheme (POMIS), Senior Citizen Saving Scheme ( SCSS) among others.

Role of equity during retirement

Remember, that your retirement corpus has to run for at least another 3-4 decades during which the inflation will keep reducing the purchasing power of rupee. In order to manage inflation, some portion of your retirement funds needs to be invested in equity funds, preferably large-cap or hybrid funds, inline with you asset allocation strategy. It will be better to avoid mid-small cap funds unless your risk profile allows.

For regular income requirements, the Systematic Withdrawal Plan (SWP) in Debt fund comes with various benefits like Flexibility, Liquidity and Tax efficiency.

Conclusion

If you are one of those whose retirement is near, the Covid-19 pandemic may have impacted your retirement plans regarding savings, investments and insurance. Approaching retirement, ensure you are without any financial obligation and have no EMI’s during the retirement period. Plan in such a way that your retirement corpus not only fetches you a regular income but also grows in the years ahead.

(The author is EVP & Chief Marketing Officer at Bajaj Capital. Views expressed are personal.)