Turning 50 is a landmark in many ways. Not only is it filled with opportunities but the 50’s bring with it some of its own challenges as well. At this stage in your life, you’d probably be at the peak of your earning years but there may also be the financial expenses like your kids’ college education, and other costs taking your space.
It would be a wise decision to have your investment plans in place by the time you reach this stage in your life. If you haven’t already, there is still hope to rectify the situation. Investing in your 50’s will have to be different from you would have pictured yourself investing in your 20’s, 30’s or even 40’s. This is because, at this phase of your career where you have a certain number of years left to make up for lost time, your investment decisions will have to be well calculated and balance the tradeoff of risk and reward delicately.
To start with, first and foremost, determine how much money you would be needing post your retirement. You can calculate this number by taking into account your current and prospective expenses and needs and also your current assets and investments. Figure out how long the corpus you have at present, will last. Don’t forget to factor in inflation when you sit to determine your future requirements.
For instance, if your current need is INR 50,000 per month and the rate of inflation is expected to increase by 6 percent; this will push your monthly budget to INR 70,000 in an expanse of just 6 years. Furthermore, at this rate, your monthly expenses in 10 years time will touch INR 90,000.
The prime prerequisite for investing is savings and if you feel you haven’t saved enough, right about now would be the right time to start focusing on saving. This is the only way you can boost your investment for your retirement. Opt for investments that offer a higher rate of return or increase the amount of money you invest each month.
At this stage in your life the aim should be at maximising your savings so don’t focus too much on maximising your returns. If you are in your late 50’s, then pay particular attention to the fact that you can’t afford to take too much of risk. In fact, experts opine that at in this decade until the end of the next, save about 35 to 40 percent of your earnings. SIPs are a good way to ensure you save a decent amount every month and invest in diversified options.
Explore mutual funds that meet your low risk profile and invest. Be thorough in your research or speak to an expert before making any decisions.
If you already have a portfolio, it is time you revisit it. We did mention that you should avoid taking unnecessary risks at this age, but at the same time you can’t be entirely conservative either. Look through your portfolio and try and reduce the allocation of risky assets and replace them with safer options. Shuffle the debt and equity allocations to slightly reduce the risk component in your portfolio.
Provident Funds can be one of the safest investing platforms and it is encouraged to have a PF account, but depending entirely on your PF for retirement needs is not something you should strive for. Make sure that your portfolio has a mix of equity as well to keep the returns on an upward graph. If you have only about 10 years to your retirement, start your investments with equities and gradually shift to much safer options.
Make sure you buy yourself a health policy while you are still years away from your retirement as leaving it for later will cost you. If you get a health cover before touching 50, you get the benefit of playing a lower premium, you also avoid rigorous testing, and you can buy on online without any trouble. Getting a health policy is the best way to guard yourself against the rising healthcare costs, but renewing it continuously is equally important. If you are a salaried employee, check to see if your employer if your company cover could be converted into an individual policy when you retire.
By the time you reach 50, you’d be committed to paying EMI’s on previous commitments and in many cases you’d be nearing the end of certain EMIs. But taking a loan would add unnecessary burden to your finances. This will not only take away the chunk for your investments but also put a dent in your savings. If you require added money for your kids higher education, take an education loan later with your child as the primary borrower. This will not only ensure your savings are intact but also build discipline in your children from a young age.
Investment planning in your 50s in not an uphill battle if you stay disciplined and not take decisions out of panic. Keep your plan simple and prioritise your needs over your wants. For further details on such matters you can always seek help from a finance professional who can help you take the right steps.