MUMBAI : Managing your finances for your retirement is one thing, while managing it during your retirement is another. According to financial planners, it is a myth that expenses come down during your retirement period. “From an extremely busy life, you will have time to do things you like. There is a belief that after retirement, your expense falls. However, this is not entirely true. We often find that expenses actually increase, because people are catching up on things that they couldn’t do earlier. For instance, watching movies, going for social occasions and travel increases. They move into a phase where there is only a replacement of expenses that happen," said Vishal Dhawan, a Mumbai-based financial planner. Besides these additional costs on entertainment, retired individuals also have additional medical expenditure. “People don’t focus on grooming but the cost goes up on other items such as medical expenses," said Dhawan. According to him, retirement goes through three phases—early, mid and latter phase. You have to factor it and approach retirement accordingly.

In the early phase of retirement, individuals find it difficult to manage time. “Some people end up managing money. Part of managing money process turns into stock trading. Suddenly people become stock traders thinking that it is instant money. Especially in bull market, they may end up making money and getting false comfort that it will take care of the rest of their retirement," said Dhawan.

HOPING TO CREATE INCOME

Considering that you have time at hand, people turn consultant to create income, he said. “The psychological aspect is that most people who become consultant after they retire are not treated in the same way when they work full time. It is perceived as something you are doing to keep yourself busy. There is no real thought on what they want to do. Since they don’t have confidence on what they want to do there is actually no income coming in. It is important for people to ensure that they have something to put in place before retiring—whether it is working in the social sector or teaching," said Dhawan. Do keep a close watch on your retirement amount. If you plan to venture into a business or any income generation strategy, factor in your risk appetite. Don’t take credit in your sunset years and avoid risking your savings.

SUCCESSION PLANNING

When individuals retire, most individuals don’t handle succession planning well. “You have to put a thought to how you plan to deal with two phases: How do you deal with transfer of assets when you are not around, and when you and your spouse are both not around," he said. As part of succession planning, it is important to have a will in place so that the transition happens smoothly.

There have been instances where post retirement, individuals have taken credit to start a venture by mortgaging their properties. Unable to repay the loan, they then get into a debt trap. Not only does it impact your retirement kitty but can also turns stressful for your family. It is advisable to stay away from debt, such as loan against property and credit card debt, during the period when you don’t have an income. Understand the cost of taking a loan before opting for one. Also remember that you have the option to do reverse mortgage if you have a property and don’t have enough money to take care of your repayment expenses. Financial institutions enable you to do reverse mortgage. Ensure that you understand the structure before opting for it. It is advisable not to take financial risk during your retirement period.

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