Financial Planning for Retirement: Here are some tips that can be used to plan better for post-retirement as soon as you start a job.
Financial Planning for Retirement: In today’s era, it is very important to do financial planning well in time, so that the tension regarding finance can be reduced after retirement. However , financial planning should also be done properly, so that your financial goals can be met. Portfolio diversification and asset allocation are its fundamental principles, which Indian investors and advisors are well aware of. By adopting these tips, planning can be done in a better way for post-retirement.
How to improve portfolio performance?
Ajit Menon, CEO, PGIM India Mutual Fund, says that most of us keep our personal hobbies and passions on hold during the job to give priority to our daily tasks, because of which the expenses increase. However, the lesson learned from the Mutual Fund industry is that portfolio performance can be improved through diversification and asset allocation.
There will be less tension in retirement
Menon says that our daily work is like the equity part of the portfolio and our personal hobbies and passions are like gold allocation. It is not until we retire that’s why we feel the need to focus on and develop our hobbies to eliminate any kind of tension during our golden years of retirement.
New identity after retirement
As one reaches retirement age, his children grow up and his professional career comes to an end. After retirement, a person comes out with almost a new identity, his old identity is over. It can be said that after retirement that person is like a stranger to himself. The better solution is not to search for yourself after retirement, but to prepare yourself for retirement in the working year itself.
This does not mean that during the working year one should keep working for long hours without giving time to the family, they also need to take care of the responsibilities of the family. Life gives some bad experiences to some people and we all have to feel those experiences which we share. As far as India is concerned, the working middle class believes that the rich are happy while the poor remain unhappy.
The focus is on the income of the younger generation
But if we look at today’s young generation, then there is a different feeling. Young adults are more focused on increasing income. Many times he does some side work apart from the job, so that his income can increase. Side work is based on one’s skill or hobby. For example if I write a book on a subject and get it published, it is an additional job for me apart from my regular job as CEO of an AMC. If the book gets good reviews and boosts my confidence in my writing ability, I may become a full time writer in retirement.
Income can increase from side work
Young adults take this idea of side work very seriously and want to align their passion with their daily chores. May be they want to leave their regular job and become full time writer before retirement, while very few people in older generation can take such a big step.
It is important to reduce risk in life
Do not over focus on your portfolio and life and reduce risk as much as possible. Another difference emerging in this young generation is about this very concept of retirement age, which is an industrial era concept. In today’s era, people want to retire much earlier than the age of 58-60, but on the other hand they never want to leave the side work. These habits keep the young generation happy even in low income. As long as they are doing what they are doing, working and earning is their passion and that makes them happy.
Hobbies can take many forms, whether it is an activity you enjoyed during your youth, or a skill you want to hone, or it is something entirely new. However, the diversification effort has to start immediately.
How reasonable is moonlighting in India?
There is a lot of debate going on in India these days on moonlighting. Its validity can also be questioned, because the idea of working multiple jobs does not fit in many ways. The reasoning behind this is that the employee is using the same skill set to perform multiple jobs. If an IT professional is moonlighting, he is using his coding skills somewhere other than the primary job. Instead companies are advised to encourage employees to take up activities, causes, hobbies outside their professional skills and support them in some way. It will also help in building mental health and prepare them for their retirement.
Lastly for an older generation, monotony for 30 – 35 years is a significant risk, which can have a bigger impact on their retirement years and mental health than the “retirement corpus”.
