Planning your retirement in this pandemic? Here is a checklist for you

Retirement planning plays an important role in any individual’s financial planning, which has been impacted by this calamity severely. The ongoing pandemic affected the finances of individuals with several job losses and large amounts of salary cuts. In the current financial year there was a fall in inflows in equity mutual funds and the past few months also saw a fall in new business premiums for life insurance companies and de-growth for the general insurance companies.

Rakesh Goyal, Director, Probus Insurance says, “There would have many investors who might have stopped investments in equities or even have delayed their insurance premiums or pulled back some unnecessary expenses. However, the pandemic underscores two important aspects of asset allocation, first being the risk tolerance and second being the portfolio rebalancing.”

It’s often seen people not properly planning their investments, for instance, having a higher exposure to equity even though he/she wants safety or opting for traditional insurance policies for long-term investments. Goyal says “In the past, many of the investors might have made the investments which were not in tune with the risk profile of the investors. This is the chance for the investors to re-jig their portfolio.”

Here are some points to keep in mind;

Opt for a life insurance policy, especially a term plan. They are cheap and pure risk plans. Experts say, not having a term plan is one of the biggest risks, that investors face. Hence, it is necessary to have a term plan with an adequate cover.

Then for your investment in retirement planning, experts say investors should look at various product mixes. For instance, Goyal says “People planning their retirement should look at guaranteed plans along with a mix of unit-linked insurance plans (Ulips) for the long-term investments. Here the risk tolerance assessment is important to ensure that investors are not taking on more risk than they can handle in the event of a stock market downturn.”

Equity markets have rallied by more than 40 per cent since March this year. Goyal says “While most investors are happy with the equity investments—but there are chances that markets can correct from the current levels due the international factors like US elections. The point here is that if one has invested in ULIPs and can take the risk and have a long-term investment horizon, then one should continue with one’s investments.”

Having said that, investors who are nearing their retirement age, experts say they should shift some money into the debt portfolio. Hence, someone in their late 40s or early 50s or senior professional might require a review of their retirement goals itself.

Note that even with an income stream to satisfy your day to day needs, try to always have some ‘cash in hand’. So that the emergency money can help you in case of a crisis and you would not have to compromise your retirement plans.