Financial Planning Does Not End at Retirement
Financial Planning Does Not End at Retirement
Financial planning is equally relevant before and during retirement. Some aspects of financial planning may have to be adjusted according to the retirement context however. This continuing need for planning arises from the need to plan for thirty years of retirement. I have witnessed people commenting that they either do not want to or would not live that long. Unless you know your departure time, you should plan for thirty years. Uncertainty is what makes planning necessary and difficult. It would have been easier to plan if we knew exactly how long the retirement period would be. Even if you failed to plan properly, there may be some damage control that you could implement during retirement.
The first step to a financially secure retirement is to ensure that you have adequate health coverage. The need for health and critical illness coverage is especially acute during retirement. Unfortunately, many medical plans provide coverage up to a specific age. That age would typically be around seventy, based on the fact that above this age the risk of illness would be significantly higher. Since it is logical to have coverage when you need it most, a plan that provides lifetime coverage would be ideal. Fortunately, certain insurers offer these plans. Another amazing thing about some of these plans is that they are affordable. I know of one medical plan that offers a level premium for life. Having coverage, in this area especially, would help you maximise your savings by reducing your liquidity risk. This would facilitate investment in high-return savings vehicles.
Your life insurance plan should be reviewed on retirement. Although some retirees may still have financial dependents, a majority would need it less. Life insurance during this period would be instrumental for estate planning. In some cases, life insurance would not provide any meaningful income protection any longer. Universal and Whole life insurance plans are the most appropriate for estate planning. The best idea may not be to surrender your life insurance plans once the income protection role has become redundant. You need to ensure that your beneficiaries are not faced with additional burdens with estate taxes and legal fees created by will probation.
Savings remains very critical during your retirement. Particularly if you were not diligent enough before retirement, you may find that you need to continue saving significantly during your retirement. Some retirees even have to find employment during this period. A high percentage of retirees receive lump sums upon retirement. You generally should not spend more than five percent of that lump sum during the first year. If you really need to do those renovations, let the extent of the renovations be guided by that. Always distinguish between needs and wants properly. Also, try to avoid investing everything in conservative savings plan. Portfolio diversification remains essential at the latter stage of life as well. It is a myth that retirees have to be ultra-conservative when investing. Even conservative savings vehicles should provide competitive interest rates.
Life is about being happy and experiencing fulfillment. Retirement should be a period where retirees enjoy more freedom and control over your life. They should ensure that they are involved in family and community. Retirees should have learned enough over the years to continue making a positive contribution. There is no greater tonic than making a positive contribution. Retirement is not all about finances. However, taking care of finances would definitely prevent additional worry and stress. Retirees deserve not to worry about outliving their life savings.
Darrell Victor is a financial services sales professional who specialises in retirement planning and group benefits.
Contact: darrell_victor_service@hotmail.com