Here’s an interesting and for some a scary scenario: With improving healthcare and medical advancements, humans are living longer and some experts believe that our life span will increase substantially, allowing us to live up to 90 years easily. This is good news, but there is a flip side to it. How should one plan the finances so that we could not only lead comfortable lives but also indulge in the myriad luxuries that beckon us?
Most of us plan for 10 years after retirement at 60. That leaves us with another 20-30 golden years of our lives in which we have to consider not just medical care but also the little joys that cannot be forfeited. To ensure a hassle-free retirement, it is, however, necessary to plan ahead. Retirement planning can thus be broken up into three major buckets:
Big or long-term goals
Most people retire at 60 years leaving around 30-odd years of life without a regular income unless you are a business owner. Our long term retirement goal should therefore be to sustain our lifestyle that we enjoy before retirement. This would include regular expenses that we are used to. Added to this is the cost of old age that entails expenses relating to health and wellbeing.
Mini or medium-term goals
Planning your finances for the first or second house that you buy which will include a low-cost loan and monthly repayments over about 15 years. Then there are commitments of higher education or marriage expenses of children. Of course, the corpus will depend on the number of children.
Micro or short-term goals
Man does not live by savings and investments alone. Sometimes we not only need to live up to the Joneses but fulfill our ever expanding urges of leading a full and eventful existence and enjoy the many splendors that life has to offer. So we need to plan vacations almost every year, or buy the piece of gold watch that you often see adorning the wrists of your friends, or the tug of the eternity ring that you have to buy for your wife. Then there is that state-of-the art car that you have always wanted to own. All these could be procured easily these days if you had a decent credit score of around 700 points but the EMIs would eat away into your SIP investments for instance. So you need to curtail your longings, postpone acquisitions, negotiate interest rates and plan meticulously to ensure you are not unduly debt ridden when you’re retiring.
Whatever you do, know that life has many surprises and its twists and turns are both pleasant as well as challenging. Plan for meeting the challenges and pray for the windfalls.