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Bring back the glitter of the Golden Age — Post retirement financial planning

Plabita Priyadarshi

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In this session, you will learn how clients who have retired are different from pre-retirees and how all financial advisors have a greater responsibility when doing post-retirement financial planning, which deals with living too long. Priyadarshi also highlights how financial advisors can help their clients understand ground realities and change their mindset.

Bring back the glitter of the Golden Age — I’d like to start off on a positive note by pointing out that the glitter never faded away, though it might’ve cascaded away for a while. But the aura or the charm it developed stays robust among individuals post-retirement, and each one of them still experiences the beauty of the same.

Let’s begin our conquest or journey by maneuvering through the topic in hand, which gives me immense pleasure to talk about.

What made me ideate my thoughts on this topic?

Well, to begin with, the concept of securing the quality of life has been my bread and butter, and, even more so, it’s now my way of life.

That being said, we live in a time when people value the internet and other things more than they value our seniors, our elders. I recall an interesting story, and I’d like to share that with you. And trust me, I’ll keep it short.

When I was a child, I always wanted to grow old, as in grow older faster to experience life’s other aspects, such as meeting new people, going places, getting independent and exploring things out of my boundaries. I even looked up to people; I played with children who were way older than my age and interacted or spoke to people whose conversations I couldn’t really understand. And do you know why I did this? To obtain wisdom — or as we call it in marketing, “the downward flow of knowledge” — from older people.

So, that downward flow of information accrued over a period of years, and the efforts I put forth got me to where I am — among people I want to be with at the right point in time. Now, I’m putting forth the effort to pay back what I can to the utmost to this sector and toward the people I’ve always cherished.

I want to thank my profession, which bestowed upon me the opportunity to contribute greatly toward making post-retirement planning for clients. This not only gives them a sense of financial security but also beautifies the entire concept of life.

When I am talking about post-retirement planning, what I mean is planning judicially the superannuation money, which a working individual gets on retirement. While planning the most important factor, I keep in mind that I am dealing with the fact of living longer.

The factors that I keep in mind and also the ones that I discuss with this particular segment are:

  • Life expectancy: Life expectancy is a statistical measure of the average time an organism is expected to live based on the year of its birth, its current age and other demographic factors including gender.

The growth in life expectancy over the past century is an uplifting story about human innovations that range from new immunizations and medications to economic development to technologies in the workplace. There is a growing chance people could live to be 100, and this has major implications for savings. There will be unexpected demands made on savings in retirement, including ongoing debt repayment, financial support for children and long-term care. So, it becomes very important when we plan for these clients’ retirements that we keep in mind the future expenditure of living longer.

  • Inflation’s impact on retirement planning: Inflation is another factor that I keep in mind when I do this planning. Inflation can cause many problems for a retired person.

Do you know that the types of goods and services elderly people use are more affected by inflation than those used by younger people? Two strong impacts that inflation has on elderly people include:

  1. It reduces their purchasing power.
  2. It consumes their savings faster.

While planning the retirement corpus, one has to take inflation very seriously. One is planning for the unknown. While planning the retirement corpus, one cannot be conservative. If a retired person acts too conservatively, it adds to the saving challenges. I am sure you all would agree that while doing post-retirement planning, it is important to ensure that the portfolio is a mix of investments that keep pace with inflation.

  • Dependency ratio: There is a rapid increase in retirees who need to sustain their post-retirement savings over a longer period of life expectancy. The old age dependency ratio (i.e., the ratio of population aged 65+ years per 100 population age 20 to 64 years) has increased substantially. It will be increasingly difficult for children to look after and support parents over their extended life expectancy.

So, the goal of planning should be to promote plans that are flexibly tailored to take care of life after retirement.

  • Taxation: Apart from health, the highest concern among retirees is taxes. Retirees are aware that taxes may significantly reduce their savings, but, at the same time, they are also not familiar with how to reduce their tax burdens. Most retired people don’t consider taxes to be an expense, and they never plan for that. So while doing retirement planning, it’s important to consider the tax environments currently prevailing and also in the future. More income is needed to maintain retirees’ lifestyle. But increased income is taxed at higher rates, so I prefer to give a solution that does not incur tax at all.

Ideal investment philosophy for investing the funds received post-retirement

Step 1: Since the flow of income has stopped, the first step I recommend is to plan the monthly return as they will need money every month to maintain the quality of life they were able to maintain while working.

Step 2: I suggest a wealth creation plan that is short-term, say about five years, where they have the opportunity to develop a corpus that could meet their needs throughout their life. Once they create a corpus for a period of five years, then I suggest that they buy annuities since, as they age, annuity returns are better.

Step 3: I suggest they invest mostly in tax-free plans for a higher and better yield and also a plan where the returns handsomely beat inflation.

This particular investment philosophy helps a retired individual to maintain the glitter of the Golden Age.

Based on these points, I have been able to do post-retirement planning successfully.

Now, I’ve been talking for a while, and you all have been generously listening and lending your attention to what I have to say about retirement planning and the way to do it. But now is the time for you to get in the rear seat and ask yourself the most important question, which is, Should retired persons be emotional or rational in their approach toward their post-retirement planning?

I’ve always thought that the idea of being rational in such planning is the best way to go rather than allowing your emotions to work against your own self-interest. Retired people should be very rational while planning their superannuation money because, as I mentioned earlier, it’s all about living longer.

For each one of us, this particular segment of retired individuals is a great opportunity to increase our business, and helping them to plan their money is also a noble cause. This makes retired individuals contributors in growing the economy and sustains them comfortably through economic changes and headwinds.

Priyadarshi

Plabita Priyadarshi is a seven-year MDRT member with five Court of the Table and two Top of the Table honors. She currently represents Kotak Life Insurance as the Company Chair in the Membership Communications Committee. For more than 14 years, Priyadarshi has been exploring solutions for retirement planning and wealth creation for her prospects.

 

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