World Senior Citizen's Day: Smart financial decisions for a comfortable retirement

As a senior citizen, it's crucial to be cautious of potential scams and take necessary precautions to safeguard your financial security.

Senior citizens face unique financial challenges after retirement, such as managing savings, investments, and expenses. Key concerns include ensuring sufficient savings, managing risk, and deciding on resource allocation. To address these challenges, consider the following proactive measures to take charge of your finances.

Take charge of your retirement finances

Organise your financial holdings by gathering all your investments, such as equity shares, mutual funds, insurance policies, and real estate to get a clear picture of your assets and liabilities.

“Estimate your expected income from sources like pensions, rentals, and annuities, and use this information to create a realistic retirement cash flow plan,” says Harshil Morjaria, a certified financial planner at ValueCurve Financial Services. Consider consulting a financial advisor to ensure accuracy and effectiveness.

Don't drop high-growth assets in retirement

In your senior years, it's wise to manage investment risks without entirely eliminating high-growth assets. Your post-retirement portfolio should aim to at least keep pace with inflation on an after-tax basis, which may require a strategic allocation to long-term growth assets like equities. Striking a balance is crucial.

“To succeed in retirement investing, manage your behaviour, set realistic expectations, and stick to a clear plan despite market fluctuations,” says Mayank Bhatnagar, Chief Operating Officer of FinEdge, a financial planning platform. A 25-40 percent equity allocation can be suitable for seniors. Avoid generic investing rules and prioritise customisation to meet your unique needs, he adds.

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Have a financial plan

A comprehensive retirement cash flow plan should factor in existing monthly income, inflation, expected returns, life expectancy, and annual expenses for leisure activities, ensuring a balance between financial security and enjoyable living.

“A retirement cash flow plan that assumes a fixed withdrawal amount without accounting for inflation can be flawed,” says Bhatnagar. To maintain purchasing power, consider increasing withdrawals by at least 5 percent annually, even if it means planned depletion of your corpus, he adds.

Managing medical expenses and health insurance       

As medical expenses often rise with age, consider investing in health insurance if you don't already have it. Carefully evaluate options, and if a family floater plan is too costly, consider separate plans for yourself and your spouse. Prioritise insurers with strong settlement ratios.

In some cases, health insurance may be too expensive, such as for a 65-year-old with pre-existing conditions. If the premium is high and you have sufficient assets to cover potential expenses, it may be more practical to allocate a portion of your corpus as a "medical emergency" fund, invested in a liquid or arbitrage fund earning 6-7 percent annually, rather than purchasing insurance.

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Beware of scams and protect your finances

As a senior citizen, it's crucial to be cautious of potential scams and take necessary precautions to safeguard your financial security. “Be wary of unsolicited calls claiming to be from banks, insurance companies, or government agencies asking for personal or financial information. Do not fall into the trap of digital arrests by the fraudsters,” says Morjaria.

Thoroughly research before investing in any scheme, especially those promising unusually high returns. “Regularly monitor your bank and credit card statements for suspicious transactions and avoid sharing sensitive information like OTPs, passwords, or PAN numbers with anyone. Ensure online investment platforms are secure and reputable,” Morjaria adds.

By being vigilant and aware of common scams like fake lottery notifications, phishing calls, and Ponzi schemes, you can protect yourself and report any suspicious activity to the authorities.