Longevity And How To Fix It Up In Your Retirement Planning?

Life expectancy is one element in retirement planning that remains highly unpredictable. You might have made just the right assumptions about inflation, rate of return or the corpus required for other goals but the uncertainty about your own life expectancy is likely to impede your retirement planning. Particularly when life expectancy in India is climbing up with every passing year. This should not come as a surprise that Indians are living longer than before due to improved health amenities. 

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The Union ministry of health and family welfare reported an increase of five years in the average lifespan of males and females during the period between 2001-2005 and 2011-2015. The life expectancy in males has improved from 62.3 years to 67.3 and from 63.9 to 69.6 years in females during the period. Resultantly, the chances are higher that you may outlive your retirement savings. 

That should leave you with one question - “How to afford a lengthy post-retirement period?”

While there is no accurate way to predict life expectancy but there are certain ways to narrow the gap that may arise between your retirement savings and your actual post-retirement life horizon.

1) Get real with numbers - Family history, your current health and several other factors play a vital role in deciding your life expectancy. Why not try a retirement calculator like livingto100.com to know how many years you can live and then readjust your retirement plans accordingly. 

2) Start investing early - The sooner you start planning your retirement, the better are the chances that your accumulated investments will be sufficient to support your long retirement. Try to target a percentage of annual income solely towards retirement planning. You might not have too much to invest in your earlier years of career but you can surely step up the contributions as you progress. One of the biggest advantages of starting early is that it gives you more time to overcome down market cycles and gain potentially higher than those who start off late. 

3) Revisit of asset allocation periodically - Revisit and review your asset allocation periodically irrespective of the fact that your retirement is two decades away or just around the corner. Your asset allocation should always stay in line with your risk appetite, liquidity needs, time horizon and investment philosophy. It is possible that negative returns from equity might have pushed down the equity composition of the asset class lower than the required or planned one and vice versa. Also, ensure that all your assets are fetching returns over and above the inflation rate. 

4) Take very good care of yourself - You can ditch the expensive medical costs as well as physical infirmities in your grey years by starting to take care of yourself right now. Several studies have established that physically active people are less likely to become physically dependent on others that can mean saving a lot that might go towards healthcare costs. 

5) Delay using up your savings as long as possible - Another important way to avoid outlasting your savings is to delay drawing from it. You can decide to work a bit longer to fund your post-retirement years or look for other ways to supplement your income. Also, you can adjust or downsize your lifestyle needs to make your savings last longer. 

Remember, retirement is not really the finish line but a start of a new phase. All it takes is a careful and systematic planning now to save you from the financial dilemma in your golden years. 

About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. She is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.

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