Wealth protection strategies for retirement
We often see that people look for solutions, which might help them in creating wealth. However, while doing so, they forget to protect their wealth. Protecting wealth is more important than creating it. This is because, if your wealth is not protected then, any amount of wealth that you create is meaningless as it won’t stay with you for long. Therefore, it is important to protect your wealth before you think of creating it. Besides, in pre-retirement phase, you have tools like life insurance, health insurance, etc. that can help you in protecting your wealth. However, in the retirement phase, no such tools would be available to protect your wealth. Now, the question is how to protect your wealth during retirement. In this article, we have listed a few strategies that can be adopted in order to protect your wealth in the retirement phase. It is to be noted that all the strategies are needed to be implemented during your pre-retirement phase itself.
Employee Provident Fund (EPF)
Many times, to get a better in-hand salary, people consider opting out for EPF. However, that won’t be the right thing to do, unless you are a disciplined investor. Contributing towards EPF would generally help you to dedicate a certain sum of money on regular basis in a disciplined way. This would help you to create a sizable retirement corpus. Also, it would help you to get regular income in the form of pension. Hence, continuing the contribution towards EPF makes more sense.
National Pension System (NPS)
People usually invest in NPS just for the sake of tax saving. However, NPS is one such government scheme apart from EPF, which allows you to have an equity exposure. Also, it comes with a host of other features that no doubt, makes it somewhat promising product. Nevertheless, it also has some drawbacks but investing in NPS is completely worth it, if you are a conservative investor and don’t want to get into the complexities of investing in other financial products. NPS also has an auto-pilot mode, where it offers to change the asset allocation annually. With this, you can reduce your equity portion and gradually increase the debt portion, that too automatically.
Emergency Fund & Healthcare Corpus
As we have said earlier, for many in retirement, income level is very low and protecting wealth in such a scenario is out of question. Therefore, to protect your wealth during retirement, start building emergency and healthcare corpus today itself. Health insurance gets costly in retirement and also comes with a lot of exclusions. Hence, building your own corpus during retirement makes more sense. There is no insurance that would take care of your cashflows in emergencies during retirement. Therefore, having an emergency fund during retirement is equally important. If your retirement is 20 to 30 years down the line, then consider investing 60 per cent in diversified equity mutual funds and 40 per cent in gilt funds (allocation is for person with moderate risk profile). However, if your retirement is 10 years away then, consider investing in aggressive hybrid funds or dynamic asset allocation funds.