With life expectancy in India increasing by more than ten years in the past two decades, retirement periods are getting longer. However, ‘Retirement’ is a financial goal is often procrastinated. In fact, a recent report (Source: HSBC) found that only 33% Indians save regularly for retirement.
The scenario is changing for the better, and you can expect to come across clients willing to create a retirement portfolio so that they can embrace the FIRE (Financial Independence and Retire Early) philosophy.
Here are some essential tips to go about planning a retirement portfolio.
- Gauge Post-retirement Needs
Get started by achieving a realistic view of your client’s post-retirement goals and an understanding of his sources of income after the regular income ceases. Factor in inflation while computing the future value of retirement goals. At retirement, most major responsibilities such as children’s education, their marriage, loan repayments, etc., are taken care of. Hence, your goal is to also estimate the realistic outflows. Your goal is to create a steady source of income to meet day-today expenses.
- Build a Retirement Corpus
Start early to build a significant retirement corpus. While instruments such as PPF and bank FDs do offer assured and fixed returns but they might not be enough to beat inflation.
This is where mutual funds, especially equity schemes can help, among the several asset classes, equities have the potential to beat inflation over the long term.
For those planning to retire early, it is essential to building even a larger corpus for a comfortable retired life.
- Get Health Insurance
With steep medical inflation, health care costs are on the rise. In case of a major ailment that requires prolonged treatment, your client might be forced to dip into the retirement savings, thereby derailing the financial plan.
Health insurance becomes your safety net and helps you safeguard the retirement corpus by mitigating out-of-pocket expenses. Along with regular health insurance, advise your clients to avail a critical illness plan as well. While a regular health plan is an indemnity plan reimbursing only hospitalisation expenses, a critical illness plan is a fixed-benefit plan that offers a lump sum upon diagnosis of a critical ailment mentioned in the policy. Such a plan also covers pre and post hospitalisation costs.
Creating a retirement portfolio warrants a meticulous approach and a deft understanding of your client’s goals, risk appetite, and current financial health. A comprehensive portfolio can be a combination of several asset classes and should cover all the major retirement needs to ensure that their golden years are spent stress-free.
IDFC Mutual Fund has the tools and the offerings to help you design a future ready retirement portfolio for your client. Visit www.idfcmf.com to know more.
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