Page 50 - Banking Finance September 2019

FEATURE

protecting the retirement from the effects of volatility in Life insurance may be relevant if pension and other income
returns. available to the household may significantly reduce on the
death of the primary pensioner and investment income is
A second career inadequate.

If you have doubts about whether the corpus you have
created will see you through retirement, then it is best to Other insurance that may be relevant for senior citizens, and
take action in the initial years of retirement when you still which can be procured at low cost include insurance to
have the skill and experience to consider a second career. protect assets such as the home and its contents and auto
The income will reduce the stress on the retirement corpus. insurance.
The longer you are able to bring in some additional income
the better will be the protection from the risk of running Keep debt at bay
out of money.
If there are debt repayments to be serviced, a larger portion
of the retirement corpus has to be employed to earn the
Adequate protection fixed and guaranteed income. The rate of return on such

An emergency fund in retirement is more to fall back on in investments is, typically, low. If you are in such a situation,
case of a large and unexpected expense rather than loss of you will end up underutilizing your corpus, which will impact
income. Typically, this will be related to health issues that financial security through the retirement period.
are not covered by insurance but are large.
Existing debt obligations may also make it difficult to access
“A health insurance policy with a sum insured of Rs 5 lakh is
a good starting point, but it is important to remember that debt in an emergency. There is a risk of the amount of
pension ceasing or reducing on the death of the primary
a health policy may not cover the entire hospital bill. Also,
pensioner, making it difficult to service the debt. “A home
some ailments may be permanently excluded from the scope
loan though is an exception to the no-debt in retirement
of the cover," said Deepali Sen, certified financial planner
and founder of Srujan Financial Advisers LLP. “It is therefore rule, given the tax benefits. However, even in the case of
recommended that an emergency corpus with at least six home loan, you should actively consider bringing down your
months of expenses be kept aside in liquid and ultra short- liability beyond the point it stops becoming tax effective.
term funds," she added.
For instance, if your interest outgo is Rs 2 lakh in a self-
Other expenses that may not be budgeted, such as occupied property, the entire amount is available for income
maintenance and gifting can also come from the emergency tax deduction, but if the interest outgo is more than Rs 2
fund. lakh, you should consider reducing the outstanding liability,"
said Nikhil Kothari, chief financial planner at Etica Wealth
Advisors, a Mumbai-based financial planning firm.

A budget that takes available income into consideration and
the discipline to live within this budget are essential tools
to make retirement life a success since the possibility of
replenishing the retirement corpus is limited.

There are different phases in the retirement years and it is
important to fine-tune the retirement portfolio to the needs
and preferences at each stage. Make this rebalancing an
essential part of managing the retirement portfolio. (Source:
Livemint)

50 | 2019 | SEPTEMBER | BANKING FINANCE