Designing Your Retirement

I think it a pity that so many Indians are so worried about retirement Link. For a few years now, I could have simply decided to quit all work and live off the income from my assets . It’s a different matter that I choose to work . I find personally meaningful work, one of the biggest sources of pleasure in my life.

Perhaps my approach of planning and providing for retirement will help many more people quit worrying about  it. So here it is :

1.First ask yourself if you wish to ever fully retire. When ?

2.Then ask yourself where you wish to live upon retirement ? Or would you really prefer to live a gypsy’s existence, going wherever your fancy takes you.

3.What are the plans, wishes and expectations of the rest of your family ,even as you retire ?What do you think of these claims ?How would accommodating their needs modify your plans?

4.Do you or your spouse have existing health issues or do you anticipate having chronic health issues ,the care and consequences of which are major factors in planning retirement ?

5.Next grab a notebook and pen and make a detailed list of what all you see yourself doing in retirement, how you would allocate time between these activities and how much it would cost you to be doing them.

As with all things I life, once you own and/ or control a capital asset or have the rights to a cashflow, you can afford a lifestyle without having to actively work to afford it. So try and  extend this thinking to all things in retirement.

Once you have decided where and how you will live in retirement, then figure out how you will make this happen. Owning your own house and being able to maintain it and afford the taxes on it is a good place to begin. The good part of owning your house is that unlike renting you don’t have to predict rent escalation in future. For maintenance, I have a sinking fund (more here: Link).And for property taxes, I have in place a corpus that can be tapped into as required. If you’d like to stay extended periods of time in different locales, consider more than one home, no matter how modest. Alternatively, if you really like the nomad’s existence consider swapping homes with like-minded people. Just be creative. Don’t be bound by the limitations of the financial/retirement planning industry. Homes need not always be an expense or worse a liability. Some of the wealthiest people get paid to stay at their great addresses and renovate their homes. Link.

I’ve provided for utilities, transport and living expenses with a corpus that I can tap into as and when required. To accommodate whatever inflation might have to be faced, I’m banking on continuing to have income from work as I don’t plan on retiring completely. Moreover I’m thinking that in case of food inflation, I can manage the rise in prices by the simultaneous rise in price of my own farm produce.

For medical emergencies, I have dedicated funds in a corpus that I can use as needed, health insurance to cover expenses and earmarked funds to pay the health cover. My promise to myself is to revisit medical costs every two years and update as per my own health situation.

Nobody really knows the future. And its really hard getting things 30-40years into the future absolutely correct. As the financial services industry keeps reminding us, inflation might raise the cost of things to levels we can’t currently imagine. But then again in the same future our assets might also be valued at silly sums of money! Even as we become prey to lifestyle inflation, technology is going to make our lives incredibly easy and inexpensive. So after you have a plan, funds in place and a system in place to reassess things every few years in future,quit worrying and start living in the moment and savouring each and every precious nano-second of life. Life is simply a sum total of moments. Don’t waste it worrying over what you and no one else knows. Don’t let the financial services industry grab too much of your current funds and lock them away for decades in pretty poor retirement vehicles that may give you no great pleasure in the future.