Top 5 Post Retirement Risks That You Need To Account For

Financial experts advise that it’s never too early to start planning for retirement and life after that. Even though retirement may still seem far away, time sometimes flies faster than one might think. Thus, one needs to start actively planning for it and the earlier one starts the better. By starting early one can prepare in the best possible way for retirement plan and take the necessary precautions and decisions. Retirement in most cases means that one will have a lot more time for leisure, travel, for the family and, for once - just to relax. Retirement also means that things will change on a financial level too. For financial safety, security and to maintain a comfortable lifestyle after retirement, impeccable financial planning is needed. For the said purpose HDFC Life has introduced HDFC Life Click 2 Wealth Plan– Golden Years Option. The plan guarantees tax-free retirement income and life cover till the age of 99 years. When planning their retirement people tend to overlook some factors which can be regarded as risks and can have a negative impact on one’s income and finances. Below we have listed the top 5 post-retirement risks that one needs to account for when planning your finances for after retirement.

Health-related costs – Planning for expenditure on healthcare after retirement is a particular problem because it is largely an unpredictable expense. But the unpredictability is regarding when and how much would be required and not whether funds would be required or not. With growing age and deteriorating health one can be quite sure that expenses for healthcare will be needed whether one expects them or not. Uncovered health care costs are therefore still one of the main risks to retirement income. With probably 25 years of retirement and taking the expenses of private sector healthcare in our country into consideration the expenses can be significant. Many times people tend to underestimate this expenditure. The simplest solution, of course, is health insurance, but not everybody will have insurance covering all possible risks. One possible approach is to ensure that in addition to health insurance, one has steady income and enough liquidity to cover any health eventuality.

Inflation – Today do we even remember what it took to buy a liter of petrol or a gram of gold few years back? Taking inflation into account when it comes to forecasting retirement income is really essential. Inflation at 3 - 4% per year, over a year or two doesn't seem excessive. But after 25 years in retirement, everything will cost much more because of the compounding effect. Also a probable future steep rise in inflation always exists. Even in the best-case scenario with future inflation not being any worse than that of the past two decades, inflation can eat away a chunk of a retiree's purchasing power. To negate the impact of inflation retirees must turn to investments capable of outperforming inflation. Inflation is one such risk that is beyond the control of an individual; hence it is important that one should plan accordingly.

Longevity of Life – When preparing for retirement planning the most difficult hypothesis to determine is precisely the end date. Because of course, living to 90 years will require greater savings than if one dies at 70 years. As life expectancy continues to increase thanks to medical advances and greater awareness about healthy lifestyles one will need to consider at what age they can afford to retire and how much will be required. One definitely needs to prepare for the real possibility of having reserves that will last at least for 25 years or more. Retirees often spend too much at the start of retirement and then find themselves in soup later in their lives and have to struggle to make ends meet. Longevity of life remains a significant risk as one has no control over how many years he or she will have left to live after retirement. What one can do is ensure that their portfolios take this factor into consideration and choose investments accordingly. HDFC Life Click 2 Wealth Plan– Golden Years Option is one such investment option being offered by HDFC life that guarantees cover and regular income till the age of 99 years.

Unexpected Financial Responsibilities and Expenses – Life is unpredictable and so is life after retirement. Accidents, medical emergencies, unforeseen life events in the life of family and loved ones can add unexpected financial burden and responsibilities on a retiree too. A comfortable retirement is an attainable dream but one should include factors such as death of your spouse, marriage or birth in the family, requirement of a caretaker later in life, relocation of your home, city, or country, and numerous other factors in one's financial planning. Retirees tend to plan to work part-time after retirement but are forced to stop work due to numerous reasons. This puts undue burden and pressure on savings and then if one decides to start something of their own it can put one’s entire retirement’s financial plan and planning to test.

Risk to regular income – We all know that bank and other interest rates can go down, stock market may collapse, changes in tax regime may happen and even economy and banks can tank. Over a period of 25 years there are bound to be thick and thins that one’s monthly retirement income will see. One may be dealing with a bear market early in the retirement and get in comfort zone real fast but as we have seen numerous times things can change very quickly. To accurately calculate viability of one's calculation for retirement financial advisors usually recommend idea of segmentation. One should have enough funds, liquidity, spread and flexibility to absorb periodic market downturns.