In my last blog we have seen that how a Retired Person might get in to the trouble While making an arrangement for regular cash flaw [income] 8 Big mistakes to be avoided in Retire Planning as well as Retirement Solution.
For details go through my last post: perfect-retirement-solution-1
Now in this blog we will discuss about Perfect Retirement Solution:
First of all we will discuss what is the Requirement to make a Perfact Retirement Solutions:
Requirement of an Ideal Retirement Solution:
- Inflation Hedging.
- Tax Efficient.
- Capital Appreciation.
- Reinvestment Risk Free.
- Liquidity On Emergency.
Now I will elaborate all the points why is necessary.
1] Inflation Hedging: The Biggest problem in retirement solution is everybody needs regular cash flaw which is not wrong but for getting regular cash flaw most of us are choosing Guaranteed Fixed Monthly Income which turns in to the Biggest Mistake for them.
Having a regular cash flaw doesn’t mean fixed income By choosing a Guaranteed Fixed Income it is not possible to beat inflation. Now a days due to advance medical science longevity is improved and span of Retirement Life is stretched to almost 25 to 30 years. Now calculate that if your monthly expenses is 25000 on your retirement you will need 143587 monthly after 30 year. Now think you are getting Guaranteed Fixed Monthly Income – How will you manage your day to day expenses .
2] Tax Efficient: Is your Monthly Income is Tax Efficient? When you are getting monthly income from Interest Income or any Annuity Plans it is entirely taxable. Which will eat some part of your Income.
3] Capital Appreciation: While choosing FDs and equivalent for generating cash flaw for monthly income, your capital is entirely blocked and will not be appreciated at all and incase of Annuity Plans there is no question of appreciation.
4] Reinvestment Risk Free: While using FDs and equivalent there is always Reinvestment Risk involved. After maturity when you renew your plan there is no guarantee that you will get same interest rate. If your new rate is reduced then your monthly income will also be reduced.
5] Liquidity On Emergency: While using FDs and equivalent, You will face some penalty, if you encash it before maturity and in case of Annuity Plans there is no liquidity at all, your money will be refunded to your Nominee only.
Then How to fulfil Requirement of an Ideal Retirement Solution:
- For Inflation Hedging we need to increase monthly income every year to keep pace with Inflation.
- For Tax Efficiency we need to seek for the options which is most Tax Efficient.
- For need to choose option in which Capital Appreciation is possible.
- Need to invest in Reinvestment Risk Free options.
- Keep in mind that your investment should have Liquidity On Emergency.
In my coming blog we will look how can we achieve his requirement.
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