“Oh God! Does this never end?”, thought Harish to himself. “When will I really see myself ‘free’ from watching out on my expenses. It was easier to do that when I was younger. How can I stop Lata from planning the trip to Switzerland that we had promised to go upon my retirement?”
“Financial freedom is a myth!”, he concluded.
Harish looked at the pile of bank statements where he had his FD and shook his head. “I guess, I will have to live with it. There is no end. Travelling the world over is only for the Ambani’s!”, sighed Harish.
Take a plunge into your Aspirations.
Mr. Harish has had an illustrious career. Having joined a major FMCG brand as an accountant, years of hard work and dedication saw him scale the ranks to finally retire as the CFO. He judiciously saved money by spending lesser on whims, but never compromising on the quality. His success made his peers envious.
In the process, he had ensured that both his children got quality education. Today, his children are in well-paying careers and happily settled abroad. His prudence allowed him to curb the urge to spend the money on an International Trip today, but instead save it for his retirement.
We often accept sacrifice today so that we can see our fruits of labor harvest after the golden age of 60. As a CFO of the Company, Harish understood the idea of being prudent with the funds available and invest in the future expansion of the Company. He knew that working capital expenses can deplete the Equity, if there was no income being generated.
The struggle was real!
He found himself blocked. He neither could put all his money into equity because there was a possibility for the corpus to erode, nor could he break his FD because his only source of income will deplete faster. His real estate property added value on his personal balance sheet, but that entire amount could not be used right now.
Through a referral, Harish contacted us. After taking a quick stock of his corpus, his desired lifestyle and his goals, we realized the problem plaguing Harish, and most of the other retired clients that we usually meet – they treat “retirement” as a goal. What we fail to account is that retirement planning is equally crucial as planning for retirement.
Retirement planning can be broadly classified into two parts. “Planning for retirement” denotes the period before the retirement age, when you work and build a corpus for retirement. It is done with a certain perspective. Its only once we retire that a different perspective gets built. That is when “Retirement Planning” kicks in. We often successfully fulfill the first part of the planning. Both the aspects of planning are equally important.
Firstly, we asked him to diversify his corpus but create a “sleep-well” portfolio. We introduced the concept of Equity and Debt balancing to allow the corpus to grow with returns beating inflation, and certainly more than an average FD. We made Harish aware of the various product options like Post Office Savings Scheme, Senior Citizens Saving Scheme, Pradhan Mantri Vaya Vandana Yojna which are better alternatives than Fixed Deposits aggressively marketed by Banks.
Liquidity planning for Harish and Lata was done by selling 4 real estate properties leaving them with 2 real estate properties - the principle place of residence and another house property to generate rental income.
We planned monthly SWP (Systematic Withdrawal Plan) which is investing in a Debt or Liquid fund and withdrawing small sum of money monthly. Harish calls it as getting a salary from himself on monthly basis. The growth in the “sleep-well” portfolio and unhindered monthly cash inflow ensured the family had the unrestricted lifestyle that they had worked so hard to achieve
We introduced Estate Planning to Mr. Harish. In the process of drafting and registering his Will, he realized that safety for planning his assets was done by him for a period after he’s no more. This removed some of his anxiety about the future and he felt more peaceful.
After we presented a comprehensive financial plan to Harish, he realized that he could travel across the globe. The icing on the cake was that he could treat Lata and himself with business class travel! They now travel to a foreign country once every 6 months.
Honestly, Mr. Harish, in the last 5 years has travelled to 10 different countries and he never fails to send us a postcard from every place of his visit. In fact, in one of his recent trips, he sent me a picture of him scuba diving in Mauritius.
A WhatsApp call followed, and he said – “I delved from shallow to deeper waters today and realized that this world has so much more to offer than skimming on the surface. Thank you!”
How to preserve the retirement corpus?
At the age of 60, before meeting us, Harish’s worry revolved around the preservation of his retirement corpus against the ever-rising inflation. His choice of investing into Fixed Deposits and Real Estate was not providing him with any satisfaction in the real sense. Certainly, leaving a legacy for his descendants will be taken care of, but who will take care of Lata and him while they continue to live their retired age.