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Three ways to improve your retirement kitty

If you are already past your professional prime, you may be worried about gaps in your retirement kitty. If you don’t want to compromise on your preparedness for your financial future, begin by focusing on these three aspects.

As we live through 2020 trying to deal with personal and professional changes in our lives, there is no better time to emphasise the importance of being prepared for the future. The economic impact of the COVID19 pandemic has belied any trend or trajectory of growth that one may have expected. If you are already past your professional prime, you may be worried about gaps in your retirement kitty. If you don’t want to compromise on your preparedness for your financial future, begin by focusing on these three aspects.

1. Save more

Its not easy to do, if you’re staring at lower income for a period ahead or if you have lost your job thanks to the economic turmoil this pandemic has brought in. If you are at a stage in life not too far away from retirement, you probably have the financial responsibilities of your children and, may be, even ageing parents. Moreover, you are likely to be used to a certain lifestyle by now. Unfortunately, if the worst-case scenario has indeed come true, your earnings may be reduced or paused.

While things might look up next year, for now, you must focus on increasing your contribution to monthly savings. The way to do that is to spend less. There is forced saving thanks to COVID 19, with leisure outings being stopped completely. However, even beyond that cut back frivolous spending on things like gadgets, imported food and beverage and even rethink the use of your car if you have lost your job or need to work from home at a lower salary. 

Saving substantially more than you were previously will help you keep up your investments despite loss of income and ultimately prevent a gap in your retirement basket.

2. Add some calculated risk

The other side of the coin is to give a push to your investment return without increasing your monthly investment amount. This can happen if you juggle your asset allocation to allow for slightly bumped allocation to growth assets like equity.

While it does increase the risk in the portfolio, you can take a calculated risk. Invest in some research or a good advisor and make the right choices in managed products like equity-oriented mutual funds. Simultaneously, try to stretch your investment time frame by adding 2-3 years more, then you have a good chance to come close to achieving your expected retirement basket size without adding more to the monthly investment amount.

Saving substantially more than you were previously will help you keep up your investments despite loss of income and ultimately prevent a gap in your retirement basket.

3. Get rid of the junk

Pull out all those forgotten investments and insurance policies, get rid of those which give you low return or are proving to be too expensive. If you already have a hefty equity mutual fund or stock portfolio, then spend some time in cleaning it up and getting rid of the underperforming securities.

Do this even if you are making a loss, because whatever money you can salvage can then be used to invest in more efficient long-term equity funds. This is not the time to sit with sub-optimal returns and low-grade financial securities; move whatever you can salvage to better quality funds that have a higher probability of giving you close to expected return in the years to come. 

Securing your financial future, has taken on a critical tone in times where life expectancy is higher leading to at least 25-30 years of post-retirement expenses. If you too are close to the retirement threshold but, thanks to uncertainty, and are unable to bring in the same kind of income, focus on saving more and investing efficiently. 

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