There are many people who use the lump sum amount received after retirement for other needs. As a result, they either become dependent on others for money or are forced to work again.
Retirement Planning: Whenever it comes to retirement planning, the first question that comes to mind is how much will be enough? Basically it depends on your current income, your lifestyle etc. After retirement, it often happens that you spend the entire amount on other things and after that you have to either depend on someone for your needs or have to work again.
Think of it like this, suppose Amit gets a lump sum amount of Rs 50 lakh as a part of retirement benefit. But, after 8-10 years of retirement, he spent all his savings for his child’s higher education, buying a car and property, among other things. Due to this, he had no option but to start working again in old age to meet his needs.
What do experts say
Abhishek Mishra, CEO and Principal Officer, Bonanza Insurance Broker says, “There are many people who use the lump sum amount they get after retirement for other things. As a result, they either become dependent on others for money or are forced to work again.” He adds, “Therefore, it is important to opt for regular income even after retirement.” We have explained here why regular income is important even after retirement.
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to be financially independent
If there is no regular income, the person has to depend on others or have to compromise on his basic needs. Hence, having a regular source of income can ensure financial independence and freedom to live on one’s own terms.
To take care of health related problems
Health related problems increase with increasing age. Its first solution is health insurance. But most people don’t choose it. Then after retirement, they do not have any insurance cover. “Even after retirement, a regular source of income can ensure that one gets proper health care and right treatment without compromising on other needs,” says Mishra.
For monthly expenses
Industry experts say that the average lifespan of humans has increased in the last few decades. This means that as long as you are alive, it is important to have a regular source of income to take care of your monthly expenses.
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To avoid financial and mental stress
“The emotional bond of the family makes many people use their retirement funds for things like higher education or marriage,” says Mishra. Therefore, if you do not have a regular income after retirement, you may have to face a lot of financial and mental stress in this situation.
Where to invest for retirement planning
There are many investment options available for retirement planning such as – direct equity, mutual funds and pension plans offered by insurance companies. However, Mishra says, “It is important to note that every investment has its pros and cons. For example, while direct equity and mutual fund investments have the potential to generate higher returns, they also have risks associated with them. Pension plans offered by life insurance companies offer little but no risk-free returns.
Before investing in any financial instrument, it is important to consider your risk appetite. Planning for a comfortable life after retirement is essential for everyone, so one should invest between different financial instruments. “Pension schemes offered by life insurance companies have guaranteed returns, so it must be a part of your investment portfolio,” says Mishra.
(Article: Priyadarshini Majhi)
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