Generating Returns Even At 60
The game changes here!
It’s time to assess how much you have and how much you need for future expenses. As the regular source of income stops , we need to analyze what are our savings and make best use of it.
Things we need to consider for Financial Planning at 60s are:
- Inflation- The current inflation rate of about 6 percent and with a typical fixed income option you will get a return of a little more than 7 percent. The inflation will eat up your return on the fixed income.
- Tax – Many fixed-income options have high taxes. Must consider the returns after taxes
- Health Concerns
A Financial Plan at this age should have the following Components:-
- Create an Emergency Fund-Usually it should be 3-4 months expenses.
- Increase the Medical Insurance
- Be Debt-Free-If you still own any car loan, home loan, credit card bill etc. pay-off them first. A credit card can get a big hole in your pocket with 17-18 % rate of interest.
- Liquidity matter a lot-If you have one house for living doesn’t buy another. Now you need more liquidity. Invest in Equity, Mutual funds, bonds etc to have more liquidly than investing in less liquid avenues like Property.
- Have a well diversified portfolio with Equities, Bonds, Monthly Income Plans (Hybrid Mutual Funds).
Actually, we have more time for our retirement savings to grow than we generally think. Retirement is not a onetime event but is a beginning of a time period when you are not earning any more. You might think you will retire at 65 and you will need all your savings that time. But you need your savings when you are 65, 75, 85 and 95 years old. You have 30-35 years MORE years to again grow you money five to six times, Maybe more.
Consider the fact that retirement period ranges from 10 years to 20 to even 30 years. Again we get an opportunity to use compounding effect of Mutual funds to grow your retirement fund further.