Throughout their work life, people save and invest to build a retirement corpus so they don't have to worry about money. But, reality can hit hard if retirees fully depend on fixed-income products, as taxation and inflation are silent killers. Therefore, one needs to lead a frugal lifestyle to manage with only a fixed income during retirement.
Living comfortably on fixed debt investments after retirement can be daunting, primarily if you rely solely on instruments like fixed deposits or bonds that generate returns not more than inflation. With the recent removal of capital gain tax benefits from mutual funds, this will become even tougher. This means that meeting your retirement requirements may require a big retirement corpus, lower expenses and, if possible additional income.
Here are a few ways to have a decent lifestyle on a budget.
Cash Flow Planning: Here, cash flow planning and management become crucial. "Having a frugal lifestyle does not mean giving up all of your favourite things. Instead, you need to figure out how to prioritize your spending. Making a list of discretionary and non-discretionary expenses is the starting point. A separate provision for discretionary expenses will help you to avoid sudden financial jerks. But, again, non-discretionary expenses need to be bucketed so that it fits well within the fixed income being generated," says Arijit Sen, a Sebi-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial advisory firm.
As a result, your financial situation can be stable while allowing you to enjoy life by being conscious of your spending. However, with inflation, as the purchasing power reduces, surviving solely on a fixed income appears challenging. "Thus, being a practising Financial Advisor, we guide people in developing an investment plan for retirement that can address both inflation and taxation," says Sen.
Living within your means is crucial when living on a fixed income. "To do this, create a budget that covers all your essential expenses such as food, housing, healthcare, and transportation. Reduce unnecessary expenses like dining out, expensive gadgets, and travel. Consider downsizing your home or relocating to a less expensive area if necessary," says Hemant Beniwal, certified financial planner and director at Ark Primary Advisors, a financial planning firm.
Re-Evaluate Your Living Situation: If you see that your retirement corpus is stretched, you need to change your style of living and possibly make some hard decisions. 'It is important to evaluate your living situation. Moving to a smaller place may allow you to increase your overall
retirement corpus because you would not need a big apartment when the kids move out. In a way, your utility costs can be downsized.," says Sen. Also, remember that apart from your health insurance coverage, you need to have a corpus for meeting medical expenses
Consider Generating Additional Income: "If your fixed income is not sufficient to cover your expenses, consider generating additional income by taking up part-time work or freelancing opportunities," says Beniwal.
Many retirees in India have valuable skills and experience that can be leveraged to generate additional income. Additionally, you can consider renting a spare room in your home or monetizing your hobbies and interests to generate revenue. By exploring these options, you can supplement your fixed income and ensure a comfortable retirement.
