Yogesh Agarwal

What are the important things to remember when planning your retirement? | Yogesh Agarwal | CEO and Founder | Onsurity Technologies Pvt. Ltd

Yogesh AgarwalRetirements are a time where people can leave all their job worries behind and relax or pursue their long-lost hobbies.

Every movie we have grown up watching shows retirement in a very relaxed picture. One where there is an old couple who takes up farming or go on a world tour with their friends. In reality, however, the seemingly good life requires a lot of planning and strategizing.

I remember when my parents were retiring, it took us at least 5 years to plan out everything from expense management to income flow and ways to tackle growing health concerns. However, by the end of it I realized retirement planning is not as stressful as we make it out to be. All you need is ironclad planning.

Let me share the pointers I took care of when I was planning my parents’ retirement.

Add medical cover in your retirement portfolio

Unlike some developed nations, we do not have the privilege of social security, nor any provision of employer-provided long-term healthcare benefits if you work outside of a public sector organization. And when you factor in the growing inflation rate, the situation becomes all the worse.

The situations together, makes it extremely important to estimate the post-retirement healthcare expenses. The formula that I used to calculate the projected post-retirement healthcare expense was – Take an average of three-five years healthcare expenses costs and keep adding 10-15 per cent to that sum every year.

As you near the retirement age, building a corpus like this will not get any easier. This is where I would recommend investing in a comprehensive healthcare plan with does not just provide coverage but also regular health checkup and doctor consultations.

While it is always better to start investing in a good healthcare plan at a young age, even if you areretiring in five-six years, I would say it is good to purchase a health insurance so that the pre-existing illnesses get covered around the time the cover offered by your employer would cease to exist at the time of retirement. Moreover, opt for top-up plans and critical illness covers. These top up would extend the cover while maintaining the premium at a low amount.

Plan retirement-friendly investment according to your time horizon

The difference in your present and expected retirement age would create an initial groundwork of an effective retirement strategy. The longer the time between today and retirement, the higher the risk your portfolio can bear. If you have more than 30 years till retirement, you should add your assets in riskier investments like shares and mutual funds.

The older you get (what was in our case, with my parents being 5 years from retiring), the more your investment should get focused on getting income and preservation of capital. This would mean higher allocation in securities, like PPF, NPS, etc. That will be less volatile and give you stable income that you
can live on.

Draft a suitable retirement plan

As you plan on hanging your boots, turning off your alarm clock and enjoying your life at leisure, you should have a retirement plan in place.

The formula that I used for calculating the expense and income post retirement looks like this –

 Calculate your current and expected future income, including income from investments (A)
 Calculate your current expenses and estimate outflows during retirement (B)
 Calculate your requirement – This is the difference between (A) and (B) and will tell you the amount of money that you require to lead a comfortable and secure retired life.

There are multiple types of retirement plans that you can start investing in from today onwards. Some of which would even get you tax benefits.

Here are my three favorites –

1. Annuity plans
2. Unit Linked Insurance Plans
3. National Pension Schemes.

While the three points here would help address the primary considerations of retirement – income and expense management – there are some other things that you should think of before you leave your job. Things like where will you spend your retirement days, savings to live luxurious retirement life, etc.

Before I leave you to plan, my last advice would be to enter the retirement phase with proper, in-depth strategizing that would help you plan for the worst and still lead a luxurious life.