In Test Cricket, one prepares and plans for the 2nd innings depending on the reading of the pitch and the lead that you have built in the 1st innings; likewise, we need to prepare for life’s 2nd innings with the same intensity and importance, for the match is generally won in the 2nd innings.
“Retirement” is something that each of us will encounter in the 2nd innings of our life; hence, being prepared for this inevitability is not only important but also necessary.
“Retirement Planning” goes beyond mere financial planning, and should cover the following 3 aspects:
1. Being productively occupied – Think about how we can continue to stay gainfully occupied after our professional careers come to an end. Apart from spending more time with your loved ones, consider spending time on your hobbies, passions or causes close to your heart.
Apart from following interests and passions, take an active role in contributing back to society however you can. Work with an NGO, set up your own NGO, become an active fund raiser for a cause or simply consult an NGO with your expertise.
What’s more, these are activities that you can start much before you hit your 60s. “Being Productively Occupied” is a choice. And you can choose to start at any time.
2. Staying Healthy – None of us want to spend our golden years visiting doctors, hospitals and consuming more medicines than food. To be healthy later in life, we must begin caring for our bodies immediately.
Set aside at least 6 hours a week for physical activity. Whether you are walking daily or running or hitting the gym, do it regularly; make it a way of life. Swimming, cycling, trekking, yoga, meditation, Zumba there are several options to think about.
The kind of food you eat is an even more critical component of building good physical health. Incorporate nutritious food into every meal; consult with a nutritionist if you have special needs or dietary requirements.
3. Financial Planning – Financial planning is a very important aspect of life. A lot of us make the cardinal mistake of thinking about it only when we are in our 40s and by starting late we give up the benefit of the “8th Wonder Of The World” – compound wealth creation.
A few key points when you think about financial planning:
a. Start early. Start very early! Saving and investing as a discipline should start from the day you start earning. Do not, I repeat, do not postpone it for a later date. From day 1, save and invest first, spend later. This is a habit which will hold you in good stead forever.
b. Think post-tax returns: When choosing investment options always think “post tax” returns and assess different investment avenues based on their returns after tax. Yes, tax laws can change over a longer term but that is beyond our control. Stay updated with the current tax laws to ensure you get the most effective return on your savings and investments.
c. Inflation: The retirement corpus should look to earn a real positive return, which consistently beats inflation over longer periods of time. Invest in assets which have the potential to earn you returns higher than inflation. This way, you can ensure your lifestyle is maintained post-retirement and does not have to get affected by higher prices and other costs of living.
d. Asset Allocation: Choosing the right allocation of assets is necessary to diversify risks and improve consistency in returns. A healthy diversification across Fixed Income, Equities, Real Estate and Commodities helps prevent common investing mistakes, like putting all your money in one type of investment.
e. Revisit Your Planning: Once you decide on your financial plan and start actively saving and investing towards it, do not forget to revisit it every few years. As our life stages change, so do our financial goals and needs. Our financial plans must keep pace with these changes; whether there is a need to increase investment amount or change the asset allocation mix at fixed intervals, a review of the existing plan is necessary.
Retirement is an event in life which needs us to be well prepared. If approached responsibly, retirement can be a time of great new beginnings, hope, and adventure.
