5 Tips you should use if you foresee an under-funded retirement

5 Tips you should use if you foresee an under-funded retirement



Retirement can be a challenge for some, if they have not saved enough for their golden years.

Retirement does not mean end to work but it means a peaceful life where you wish not to have any liabilities and are free from all your responsibilities. A comfortable retirement is one where you are spending time with your loved ones and enjoying meeting your aspirations you had. But to achieve this you need to retire with enough corpus in your hand which can sustain the life you wish to live. 

What do you do if you find that you will not have adequate money to meet your needs when you retire? You probably have missed out starting early and you realize that when you retire you will have to cut down your expenses by nearly 40% to sustain the corpus for your lifetime. But cutting down expenses in retirement years is not easy and at times is painful when you have lived a particular lifestyle for 30-40 years. 

How to solve this issue? 

Here are a few ways in which one can consider option of enhancing retirement corpus: 

1.Analyze your cash flows: Much of your retirement needs depend on the lifestyle you have built. If your expenses are higher today then there is a probability that your retirement needs is also going to be higher. This will bring the requirement on higher side. Hence, it is wiser to analyze your cash flows and see how you can cut down your expenses today then waiting for your retirement. What this will do is that by the time you retire you will be already living in a lifestyle with reduced expense which will enhance sustainability of your retirement corpus. 

2.Rebalance investment portfolio If you have planned your investments then they will be more aligned towards your risk appetite. Look at your investment portfolio again and see if there are possibilities of enhancing your returns. Though it will come with higher volatility, you may consider increasing your exposure towards equities at this time especially if you have kept it low in your retirement portfolio. A periodic rebalancing of you retirement portfolio becomes more necessary to ensure it can remain on course. 

3.Look towards employer benefits EPF is a great tool when it comes to planning your retirement. You have been contributing towards it but withdrew from it midway in your career. If you have identified a shortfall in your retirement corpus it may be time to increase contribution towards it. You can consider voluntary provident fund and maximize your EPF accumulation. Although it’s a debt exposure but considering the returns it generates, it can form a vital option while you are looking at enhancing your retirement corpus. 

4.Delay your retirement: You might have planned to retire at 55 or at 58 or even 60 but when circumstances like these occur then delaying your retirement by few years should be on your cards when other options are not feasible. By retiring a bit late than what you planned, you give more time to your investments to accumulate and also you get to utilize your employer benefits such as EPF, gratuity , LTA and others. You are then able to manage few years from your employment and are able to enhance your retirement corpus. 

5.Cut down on expenses: This will be the last option to consider for your retirement years. If you have already reached near your retirement and you have analyzed that your expenses will not let your corpus sustain for the required number of years then you should look at cutting down your expenses. The other options mentioned above are not feasible when you are 2-3 years away from your retirement. But the reduced expenses will give you more years from the same retirement corpus you have accumulated. The golden years are painful when you do not have enough money to meet the needs. The later years of your retired life will not allow your body to work and thus you will be relying on the funds you have accumulated or will become dependent on your children. To avoid any dissatisfaction in those times you need to take steps. 

Stretching your retirement income becomes necessary when you are already in a shortfall. Look for ways and options and see where you get the most benefit.

Happy investing

Source:Moneycontrol.com