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One of the common myths about managing your retirement finances is that your task is done once you have a retirement corpus is in place and hang up your boots after hitting the milestone. While putting together a retirement corpus is important, continuing some financial hygiene during your sunset years is equally crucial. There are certain financial habits that you should carry on with. Here are three such financial habits to keep in mind.
Keep an emergency fund
It is advisable to have an emergency fund in place for all individuals to get over situations like the ones covid-19 spawned for many people in terms of job losses. Retirees who have a corpus to live by may often think that they do not fall into this category but that’s not true.
The retired must keep some money aside for sudden large expenses that may crop up such as loss of assets due to a natural disaster, family emergencies or sudden loss of a spouse or divorce or even healthcare expenses that are not covered under any kind of insurance. After all, you won’t want to erode your painstakingly-built retirement corpus that will support you for the rest of your life.
Invest in equities, in part
According to data from the World Bank, life expectancy is a little over 81 years in the UK. With most people expected to live at least 15 years after retirement, it makes sense to keep the retirement corpus in different buckets of investment. For instance, the money that you need immediately after retirement in the next five years should be in safer instruments, preferably non-equity. However, you may consider investing the money that you would need in the latter part of retirement in equity instruments. As you come closer to that phase, keep shifting equity investments to debt and fixed-income products. Investing in equities for the long term is relatively safer and will give a returns kicker to your retirement portfolio.
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Have life insurance
Life insurance protects the family in case of the primary breadwinner’s untimely death. However, it is not just the young or the mid-aged who need life insurance. If you have any debt such as house mortgage or family members or others who are dependent on your pension income, you must have a life insurance. And that holds true even for retired persons with liabilities.
Even if your pension gets transferred to your family after your demise, they may also need financial back-up for the bigger expenses in the future. Funeral planning is another reason why older people buy insurance.
However, remember that the premium amount or the cost you pay for your life insurance policy may be higher for retired people, depending on the age and tenure of the policy. This is primarily because insurance companies assess the mortality or death risk a person faces depending on the age, profession and health.
