Dear Qualified Financial Advisor,
I just turned 52. I’ve spent most of my life working and providing for my family. We have our own apartment in Mumbai that my wife and I now live in — my two children are currently studying abroad. It’s been a very comfortable life for us so far, but now, with my retirement on the horizon, I’m a bit concerned about my finances. I’m not sure I made the right investments as I don’t feel secure enough about maintaining our current standard of life post-retirement. What do I do? Is it too late to course-correct?
An Anxious Mumbaikar
Dear Anxious Mumbaikar,
You’re not alone — and to put it simply, it’s not too late.
Anxiety about not having enough money for a financially secure retirement typically arises in one’s 50s because of two reasons:
One, not knowing how much funds you’ll need during retirement. This creates anxiety even if you do, in fact, have enough. You should consult a professional to determine this amount.
Two, actually not having enough money for a secure retirement. This is usually a result of poor money management. While good income and a long earning period may have covered for many money mistakes so far, people in their 50s begin to realise that they no longer have the luxury of time and that they can’t afford any further mistakes.
From what you have described, a big concern seems to be not having much in terms of liquid investments. This leads to either sacrificing some life goals or having to borrow for the same. The most common reason for this is over-exposure to real estate.
Then there is not having enough savings. While building a good life for you and your family, and making sure your children have access to a good education and opportunities, you may have postponed savings or used them up in the short term. This would ultimately leave you with inadequate savings for a secure retirement and take away the feeling of being financially free.
Often, another issue is a poor choice of investments. An over-reliance on ‘safe’ investments like traditional LIC policies, bank fixed deposits, etc, leads to poor returns and often fails to generate positive real returns (i.e. post-inflation, post-taxes). On the other hand, reckless risk-taking may also be detrimental. Common examples of this include risky investments offering a high ‘fixed return’, speculation in stocks or crypto for quick returns, and so on. In the long run, being too safe or taking uncalculated risks can both lead to regrets.
Like I mentioned, it’s not too late to course-correct and seek help to get back on track for achieving your financial goals. Here’s what you should look at:
Have a contingency fund. Have sufficient liquid assets to cover contingencies that may disrupt your income and/or cover any sudden unexpected expenses.
Get insurance cover. Ensure adequate life insurance and disability insurance for the earning members in your family, and adequate health insurance for all members of the family. This will create a financial safety net for you and your family so that your goals and dreams are realised, notwithstanding adverse events.
Optimise expenditure. Unlike previous generations, many people today believe in enjoying the present rather than just saving for their own future and for their future generations. This may backfire, as they risk falling short of savings in their retired lives. Ideally, with a longer life expectancy, one ought to plan for 20 to 30 years of expenditure with little or no income and ever-rising costs. The solution often lies in targeted expenditure, and maintaining a monthly budget.
Optimise investments. Investments need to be planned based on your target corpus, the number of years available to create it, your liquidity requirements and your risk appetite. With ad hoc investments made over the years, most investors’ portfolios need a good clean-up. Removing poorer investments from the portfolio creates the space to include good ones. With a well-balanced portfolio, you can generate adequate returns without taking undue risks. A well-planned investment portfolio also tends to be simpler and therefore easier to manage over the years.
Get help. It’s certainly possible to implement the above on your own, using the abundant information and various finance platforms available on the internet. However, the probability of making mistakes may be higher when taking this route. Using the guidance and assistance of qualified and experienced professionals can help make the process smoother and easier, and may generate a better result in the long term but does involve some costs. So, choose wisely.
I hope this helps and that you enjoy your life without any regrets or financial anxiety in your fifties and the decades to follow!
1 Finance Advisory Committee for Qualified Financial Advisors — Mumbai Chapter