If you plan to retire in your 60s, your 50s become crucial. While we know that you continue with your investments, it wouldn’t be incorrect to assume that you are no longer in the “taking risks” phase of your life. First, let’s address the key financial moves that will help you set the tone of your golden years to come.
According to Rishabh Parakh, chartered accountant and founder of Money Plant consultancy, which specialises in executing financial plans, “It’s time for you to reassess your asset allocation and monitor whether you are on track or not, and evaluate your retirement strategy again. It is also a good idea to reset your financial planning and find out the gap between your goals and the timelines to achieve the same. Next, clear off all your debts and loans if possible. Fourth, make sure to have sufficient health insurance cover. Furthermore, keep maintaining one year’s emergency fund and increase your health insurance plan if not done earlier. Finally, create a will,” he says.
By the time an individual hits his/her 50s, s/he has spent substantial amount of time working (a few cases aside), and over time, has been able to diversify his/her portfolio and built wealth. However, during this decade, it’s also the time to re-asses some policies, and surrender the ones that are not working. “Drop everything you have invested in without understanding it, and the ones which do not suit your asset allocation and the risk profile. So, with respect to your insurance plan, surrender the unproductive policies or get them paid up. Make sure not to touch your pure term plan unless it is not suiting to your financial plan,” Parakh advises.
While you are filling in the gaps, it is also a great idea to continue investing. In terms of the options that you have, Parakh says, “Your asset allocation can include a new category of investments provided you have a good net worth, say a minimum of $1Million. You may include some of portfolio management services (PMS) or even a getting in to a venture capital (VC) fund (highly risky and not advisable without understanding the risk behind it). But before you do that, do not jump in to any new plans like becoming a part of a VC circle (investing in a VC fund through common friends) or a simple new products offered by insurance or mutual fund companies, unless you are clear about your post retirement life. If you are a person of simple means and a frugal lifestyle, you won’t need any fancy investments; you can be happy with simple asset allocation.”
It is assumed that most people will follow the conventional path, and invest wisely to be able to enjoy the later years of their lives. However, what if someone hasn’t for a certain reason? Is there no scope for them? “It’s late but one can make up for the loss to a certain extent. First things first, check your standard of living and find out your monthly expenses and the future value to decide on the corpus you would need to generate that kind of monthly income during your golden years. Rebalance your loans and overall portfolio, and get enough insurance cover at the earliest,” Parakh concludes.