When planning for retirement, three types of risk should be considered: longevity risk, lifestyle risk and health risk. Longevity risk is when you outlive your body, and lifestyle risk is when you compromise on your needs and aspirations. Health risk corresponds to unforeseen expenses due to hospitalization and age-related illnesses.
Anup Bansal, Chief Investment Officer at Scripbox, says: “The two types of risk – longevity risk and lifestyle risk – determine where to invest and how much to invest.”
Therefore, it is crucial to consider the following factors when planning for retirement and budgeting for your future lifestyle:
Saving for daily and lifestyle expenses: You shouldn’t have to compromise your post-retirement lifestyle. The day-to-day expenses of your life in retirement may differ from what you have now.
Bansal says, “As inflation rises, so do the prices of basic necessities and maintaining a way of life. This should be well reflected in retirement budgeting.
Health expenditure: Experts say it is one of the biggest expenses after the 60s. Experts say one with his partner should start investing in a high-value health insurance policy in his 40s to avoid rejection. of claim or financial vulnerability in the future due to serious illnesses.
Constitution of an emergency fund: Saving for emergencies in midlife is quite common; we all have an emergency fund saved for a rainy day. According to experts, the same should apply to retirement planning.
“One can invest a certain amount separately to create such a fund for one’s retirement beyond typical saving and investing. This should be enough to last at least 12 months,” says Bansal.
Life Goal Costs: While you were working a full time job, you may not have devoted time to some of your life goals like travel, golf, reading, vacation homes, etc. Although you’ve saved enough for retirement, experts say you need to consider factors that can affect your life goals.
Bansal points out that “factors related to life goals weigh more heavily on lifestyle choices. It is better to be clear about your objectives when there is still time to sweeten life in retirement.
Part-time work and volunteering: Retirement also means more time on hand, so productive use of time keeps the mind sane and eliminates unnecessary stress. This has the effect of creating a general feeling of well-being. Therefore, experts say you need to think about how best to use your time in retirement.
Bansal suggests, “It can be with a nice part-time job and/or volunteering with social organizations.”
Reach your financial goals with the help of an advisor: While DIY is all that’s going on right now and you can execute basic financial planning for your retirement, it’s still best to consult a financial advisor who can help you with a 360 degree outlook on your investments, risks taken, lifestyle choices. , financial requirements, etc.
“They say that retirement is the second leg of life and if financial planning for this phase is done meticulously, one can reap the benefits,” says Bansal. Retire well so you don’t have to look back.