Married couples generally have a lot of plans for their future – buying a new house, vacations, future education of their children and so on. These plans seem more and more important because they have to happen as soon as possible but there is one thing that will surely happen in the distant future that very few married couples prepare for – retirement . Any good financial expert will tell you that it is best that you start retirement planning as early as possible. This is because since you both are working now, dual income flows into your house; and both of you retiring later on will result in loss of two incomes. Post retirement can be the best years of your marriage; if you understand each other’s future goals and needs, take action now.
Here are few things you can insure while planning for retirement as a couple.
1. Get clarity about each other’s future goals
You might be imagining yourself working 5-6 years even past your retirement, while your partner might have a totally different outlook and might want to retire much earlier at the age of 50.
Having clarity about future goals helps have a fairer idea about your future financial needs; and how much you need to invest today. There are many options for future investments such as mutual funds, pension funds, retirement income funds etc. Retirement plans like the ICICI Prudential Easy Retirement – Regular Premium Plan will provide you with a monthly/yearly income post retirement. For instance- We did a check on the online option offered by ICICI Prudential and for this fund; if you are 35 years of age and start paying a premium of Rs. 10,000 per month for 30 years, you can get a get a pension of 10.58 lakhs p.a. for life (assumed rate of returns 8%). Making a joint payment with your spouse can reduce the burden on one person and leave room to easily invest into other options such as a PPF, ULIPs, and so on.
2. Save together for retirement planning
As retirement for a working couple will result in loss of 2 incomes; you need to be well prepared to manage this loss. Hence just as you make today’s financial expenditures together, you also need to save together for retirement. Especially as inflation can have a powerful impact over the next 20 to 30 years. For instance with a 6% inflation rate expenses of Rs. 4 lakh p.a. today means Rs 22.97 lakh p.a. after 30 years; and this will only suffice for one year of your retirement. The advantage of a working couple is that they earn sizably more than single income families and if they jointly contribute towards retirement planning, then not only does it become easier but can also result in the substantial savings per month which can be used for retirement planning. While starting to save together, you also need to consider both your future income needs. Maybe you have planned to live a lifestyle suitable to half your income; but your spouse has a different lifestyle in mind. Aligning these expectations, you can start saving jointly into the right investment tools.
3. Start earlier by investing together to get higher returns
Investing earlier and sticking to a long-term investment strategy most experts believe will bring you the best returns and financial success. If you both invest jointly into a retirement fund, you can afford to start early and let your money be invested for a longer time. Hence this way your investments have a good potential of giving higher returns due to the principle of compounding.
4. Diversify your portfolio for more security & flexibility
It never makes sense to put all your eggs in one basket. Imagine investing 85% of your savings in an FD or PPF that gives limited returns. As a couple it is even easier to diversify your savings across various asset classes as well as within asset classes. For example, you can consider taking a more equity oriented ULIP for higher returns; and your spouse can opt for a balanced one. While PPF’s and fixed deposits offer guaranteed returns; market oriented investments cannot be predicted, but are necessary to help beat inflation. Make a diversified portfolio as it has potential to protect against loss. With the help of a 2nd income you can easily build a balanced mixture of six to eight investment types, divided between both of you.
Finally retirement investing is not very different from making other investments as is all about taking a measured risk and plan for making higher gains in the future. In case you are worried that you may be locking your money away and will need it in the future; a good option is to opt for few investments which can be liquidated as and when you need them or diverted when the market goes down. For instance- ULIPs can be easily taken online; even with a small premium amount of Rs 2000 per month to start with; along with the benefit of allowing you to easily switch from equity to a debt portfolio.