Financial planning is equally relevant before and during retirement. The aspects of financial planning may have to be adjusted according to the retirement context however. This continuing need for planning arises since we should plan for thirty years of retirement. I have witnessed people commenting that they either do not want to or would not live that long. Unless you know your departure time, you should plan for thirty years. Uncertainty is what makes planning necessary and difficult. It would have been easier to plan if we knew exactly how long the retirement period would be. Thirty years is a long time. There is not as much information on planning during retirement as there is on planning for retirement either. Even if you failed to plan properly, there may be some damage control that you could implement during retirement.
Ensure that you have adequate medical coverage. The need for health and critical illness coverage is acute during retirement. Unfortunately, many medical plans provide coverage up to a specific age. That age would typically be around seventy, based on the fact that above this age the risk of illness would be significantly higher. Since it is logical to have coverage when you need it most, a plan that provides lifetime coverage would be ideal. Fortunately, certain insurers offer these plans. Another amazing thing about some of these plans is that they are affordable. I know of one medical plan that offers a level premium for life. Having coverage, in this area especially, would help you maximise your savings by reducing your liquidity risk. This would facilitate investment in high-return savings vehicles.
Your life insurance plan should be reviewed on retirement. Life insurance during this period would be instrumental for estate planning. In some cases, life insurance would not provide any meaningful income protection any longer. Universal and Whole life insurance plans are the most appropriate for estate planning. The best idea may not be to surrender your life insurance plans once the income protection role has become redundant. You need to ensure that your beneficiaries are not faced with additional burdens with estate taxes and legal fees created by will probation.
Savings remains very critical during your retirement. You want to enjoy your retirement naturally. If you were not diligent enough before retirement, you may find that you need to continue saving significantly during your retirement. Some retirees even have to find employment during retirement. A high percentage of retirees receive lump sums upon retirement. You generally should not spend more than five percent of that lumpsum during the first year of retirement. If you really need to do those renovations, let the extent of the renovations be guided by that. Always distinguish between needs and wants properly. Also, try to avoid investing everything in conservative savings plans and use headline inflation as your guide. It is a myth that retirees have to be ultra-conservative when investing. Even conservative savings vehicles should provide competitive interest rates.
Life is about being happy and experiencing fulfilment. Retirement should be a period where retirees enjoy more freedom and control over your life. They should ensure that they are involved in family and community. Retirees should have learned enough over the years to continue making a positive contribution. There is no greater tonic than making a positive contribution. Retirement is not all about finances. Taking care of finances would definitely prevent it from being a source of worry and stress. Retirees deserve not to worry about outliving their life savings.
Darrell Victor is a financial services sales professional who specialises in retirement planning and group benefits.
Contact: darrell_victor_service@hotmail.com
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