Retired person and Consultant ? A perfect financial planning tips for youOur relationship with our money changes every few years; it largely depends on the lifestages we are in. And, for every new season of life, the road-map for moneymanagement needs some course correction. As a part of Financial literacy andknowledge coaching, we covered various topics; Today, we bring you financial planningfor retirees who now are consultants.
You were once an employee but now in retirement. All those years of work-experience have made you an expert. You now work as a consultant, dispensingvaluable advice and making loads of money. Probably you make more today then whatyou used to make as an employee. With financially independent grown up children, thehouse and car already paid for, a small fortune kept aside (retirement kitty) and theconsulting assignment money rolling in every now and then, life looks good. And, thespouse also has a something running at the side, which keeps her occupied and bringssome decent money in. Your nest may be empty, but the nest-egg is growing nicely. If you are in this position, you must have done a thing or two correct as far as financesgoes. Until now. But what worked then may not work now.
At this stage of your life it’s possible that your actual expenses have reducedsubstantially (no children as dependents, etc). So you think the amount of emergencyfunds (three-six months’ expense) you keep aside should reduce (since expenses havereduced). But that’s hardly correct. “Any consultancy-based income is lumpsum (largeramounts, but irregular) and with not much annuity, you need to keep aside a larger cashbalance.” Have easily accessible, and slightly larger amounts kept aside. Anything morethan six months of expenses kept aside is good enough. However, if you get a regularpension (ex- government employee) apart from consultancy income, keep aside lessthan six months’ expenses for emergency.
We assume you already have a term life insurance policy running. If not,you don’t need get one now, since you don’t have any financial dependents or liabilities.
Ideally, you should already have a medical cover for self and spouseas well as critical care cover, serious disease disability policy, an accidental death-cum-disability insurance. If you don’t, study your family’s health history and get yourself andspouse adequately insured for health needs. “One of the biggest issues with consultantsis that they overestimate their health and underestimate their expenses.” With healthinsurance costs going up each day, the regular Rs 3-5 lakh cover may not be enough foryou. But then this also depends on your specific case. “One of the most important thingsto look into is long term healthcare needs. Sadly, unlike many western countries, Indiastill does not have specific insurance for long term health care needs.” If you’ve been a central government employee and get health insurance under CGHS,you may not need to worry much. But, if you’ve been a private sector employee, andnow a consultant, you better use some of the consultancy funds towards making acorpus for long-term health care (LTHC) expenses. “While building a LTHC corpus(usually a long tem goal, for after 10 years), ensure that you have a 40:50:10equity,debt and Gold instrument ratio.” Investments: At this stage you will need to re-balance your existing portfolio, as peryour life stage, risk profile and market conditions. Planners suggest that as you growolder, your equity exposure should decrease and debt exposure increase. We suggest