What can one do if the retirement corpus is not big enough?

If the retirement corpus is not good enough to meet the post-retirement expenses, for any reasons like –

• Retirement planning started late
• the other goals like children’s education or their marriage took prominence
• Financial indiscipline
• exorbitant spendings
• Improper risk management
• Wrong asset allocation and so on

one can think of resorting to any or a combination of the following options based on one’s situation/ requirements.

Continue work after superannuation: This may be a stupid idea from my side. I agree. For a vast majority, this may not work. Getting employed after 60 is going to be challenging, with a capital C. Also, one’s health might not permit such work. The easiest is to seek to extend one’s tenure with the current employer itself. That may probably be the best option for continued employment in retirement.

Some very skilled people may offer their services as consultants. But then, this is not going to work for everyone. Others who need to work for a few more years may look at Internet-based jobs which do not require them to travel and can be done from home. This could probably be a very easy option for professionals like doctors, lawyers, architects, CAs etc., who can continue working for as long as they want.

Relocate: One can always consider relocating to another town to bring down costs. Selling off properties in big towns or cities may free up some money, even after buying a home in a smaller town. Also, the cost of living could be lower in a smaller town, which can help. But here, one may have to leave behind a known place and friends – which makes it a difficult decision to make.

Cut down on expenses: One can cut down on expenses by scaling down one’s requirements. This may mean a comedown in terms of lifestyle; this could be an option where none other exists.

Reverse mortgage: There are many senior citizens who are asset-rich, but cash-poor. For these people, their home is their biggest asset. Such people can borrow against their home equity. 

A regular income which is typically referred to as an annuity can be set up for up to 15 years, which can help greatly. Also, they can continue to live in their homes for as long as they live. 

But reverse mortgage is not all that popular in India as the home to be reverse mortgaged should not be more than 15 years old, the annuity will be calculated on a lower value compared to the value of the home, the interest rate charged is high etc. Hence, it may be a better idea to simply sell the home, instead of doing a reverse mortgage.

Let’s hope we don’t have to resort to any of these. Let’s give fiscal prudence the pride of place in our lives and avoid Grecian tragedies!

This infobite is taken from the book – If God was your Financial Planner, written by our founder & managing director, Mr. Suresh Sadagopan. You can also read his book to know much more about financial planning, personal finance and our approach itself. It is written in an easy-to-read storybook format.