After following the process of evaluating your financial status for retirement, you may fall into any of the following categories .....

Category A :

Your target rate of return will be high due to les saving per annum. If your target rate of return in high, you would have to increase equity exposure. This would increase the volatility of the portfolio.

Solutions :

You have the following options:

a) You to live with that risk level which is never advisable .

b) You save more to a level and asset allocation strategy.

c) You increase your working period which will give more time to add to your retirement kitty by saving for more years.

d) You work part time after retirement.

e) You lowering your annual expenses when you retire by shifting house to other location or by reducing entertainment expenditure among others.

Category B :

Your saving rate is high so your target rate of return is in the comfort zone. In this case you can safely retire at the age you have decided to retire. But you have to regularly monitor your portfolio to keep it alive and workable. It is important to keep balancing the portfolio as planned to make it reliable.

Parting Words :

1) At least have debt exposure to an extent that it can provide you for five years of retirement period. This reduces your overall risk due to unpredictable equity markets.

2) Planning for your illness is equally important along with money management. Taking a mediclaim policy can do this.

3) Do not consider annuities as investment. It is to protect against outliving your assets. At the end of the day, it is your insurance contract. You don’t buy annuity to make money. You buy it to make sure that you have income when you are alive at 95.

4) Have a trusted professional advisor to help you with uncertainty.

(The author is a certified financial planner)