InflaMatch Wealth Management

EXPENSES TO KEEP IN MIND WHILE PLANNING FOR RETIREMENT:-

Golden Years’, or ‘retirement’, is when you can finally stop to smell the roses after juggling numerous work and life responsibilities for 30 to 40 years. This is when you can finally call your own, live for yourself, and fulfil aspirations left unattended till now. To convert these dreams into reality, you must undertake one essential business: retirement Planning.
Retirement planning is a crucial aspect of one's financial journey that helps individuals prepare for their post-retirement life. It involves identifying financial goals and estimating living costs, usually after the age of 60, and building a corpus to support a comfortable life after retirement without compromising the standard of living.
Retirement planning is essential because it helps senior citizens:

@ Retain financial independence without asking their family or children for support.
@ ensure that they have enough savings to cover unforeseen expenses.
@ have the necessary resources to live a fulfilling and rewarding life during their retirement years.


Inflation and its Impact on the Retirement Corpus ---

It is essential to consider the impact of inflation, i.e., the rise in living costs on the retirement corpus. Inflation reduces the purchasing power of money over time, which means that the same amount of money will buy fewer goods and services in the future. Rising healthcare costs and other essential expenses can also erode the retirement corpus.
Starting retirement planning early in life is recommended, as it allows more time to accumulate wealth due to compounding effects and generates inflation-adjusted investment returns. To combat this, retirement planning should include investments that offer returns that beat inflation. Diversification of investments is also important to reduce risk and ensure that the retirement corpus is not affected by market fluctuations.



8 Core Expense Areas to Consider While Planning for Retirement--

The nature of living costs differs substantially as one advances through the golden years of one’s life. Expenses towards health care assisted living, and overall safety and wellness assume precedence over other costs. A smart retirement plan considers these areas and makes adequate provisions to meet those while accounting for the expected rise in the price levels in the economy. Following are the major heads of expenses that an individual need to keep in mind while planning for retirement.

Healthcare expenses--

As individuals age, their healthcare expenses increase. These expenses could be due to hospitalization, routine check-ups, medication, and any specific diseases they may suffer from. One can plan for these expenses by investing in a comprehensive health insurance policy and building a separate emergency fund. It is essential to factor in the impact of inflation and healthcare costs in the city of residence, as healthcare costs are higher in metro cities than in Tier II and Tier III cities.

Utility Expenses--

Utility expenses such as electricity, cooking gas, water bills, municipal taxes, etc., are essential to our daily lives. It is necessary to estimate these expenses post-retirement as they could increase due to inflation and rising costs. One can plan for these expenses by investing in a fixed deposit or other low-risk investment option that provides steady returns.

Charges for Household Help--

Most senior citizens require some domestic help to carry out regular household chores. Additionally, some may require special caretakers to assist them with their medical needs. It is essential to factor in these expenses while estimating post-retirement expenses. One can plan for these expenses by building a separate fund or investing in a guaranteed monthly income plan.

Wellness Expenses--

It is highly desired for senior citizens to stay mentally, physically, and emotionally fit. Higher degrees of social involvement through some activities or hobby classes such as yoga and gardening may help a lot on this front. It is essential to factor in these expenses while estimating post-retirement expenses.

Taxes--
Even after retirement, individuals may be required to pay taxes on their income. These taxes could result in an additional outgo of already dwindling income. It is essential to plan the taxes in such a way as to minimize their impact while selecting investments. One can plan for these expenses by investing in tax-efficient instruments such as tax-free bonds, SCSS, PPF, or NPS.

Rising Insurance Costs and Renewals--
Insurance is essential to financial planning, and senior citizens must have adequate health insurance coverage. However, as individuals age, insurance costs tend to increase. Hence, timely renewals or top-up plans must be selected, especially in health insurance policies, to provide extensive insurance coverage in the retirement years.

Any Outstanding Debt--
Suppose senior citizens have any outstanding debt, such as education loans taken for their children, home loan, etc. In that case, it is essential to accelerate the payments towards these obligations either immediately before retirement or in a short period after retirement. The delays in payments may cause excessive outgo towards interest charges, making it difficult for the investment portfolio to generate similar investment returns.

Other Expenses--
Retirement planning must also provide for discretionary expenses such as gifts for the family, children, and grandchildren. There might be recurring charges to be paid for legal and professional counsel required for carrying out the financial and legal tasks associated with retirement, estate, and legacy planning. A senior citizen may wish to donate towards a charitable cause or expend towards long-cherished personal aspirations such as a dream vacation or a house. These expenses must also be considered while crafting the investment portfolio for retirement.



Investing in a balance of debt and equity can help you cover your fixed costs and inflation over time. This combination lessens the financial burden by maximizing returns and minimising losses due to market fluctuations and volatility. Consult a financial planner for assistance if you struggle with retirement planning. Don't forget that the magic of compounding can help you amass a comfortable nest egg for your golden years if you start planning for retirement early.

early retirement planning can help everyone to reach your goal before the actual retirement age , and it will help to your life balance .

DO YOUR RETIREMENT PLANNING WITH InflaMatch Wealth Management AND WE WILL TAKE CARE YOUR AFTER RETIREMENT LIFE .

# InflaMatch Wealth Management # Wealth Creation # Retirement Planning

WHAT TO LOOK FOR WHEN INVESTING IN NCDs ?

Looking beyond the returns promised and focus on the fundamental strength of the issuing company.

Non-convertible debentures (NCDs) are popular among individual investors looking for regular income or looking to enhance returns from their debt portfolio.
The high-interest pay-outs from companies issuing NCDs are the first lure for investors. These issues are relatively smaller in size and are lapped up by retail and institutional investors alike, within the first few hours on opening day.
Earlier this week, Edelweiss Financial Services, came out with its second public offer for NCDs this calendar year, and the long duration 10-year NCD is offering up to 10.45 percent annual interest. Last month, IIFL Finance Limited, had an NCD offer where the 5-year bond was offering up to 9 percent annualized interest.

However, the return is only one side of the investing coin, the other side is the risk. If the interest coupon offered is temptingly high, one has to question why the company is willing to raise funds at such a high price?
While good quality NCDs can provide an alternative investment in your debt portfolio, here are some dos and don'ts to keep in mind.
What you should know before you invest
The first thing to check after you have ascertained that the return is attractive is whether the NCD issue is secured against some assets of the issuing company. When you invest in an NCD issued by a corporate or a non-banking finance company, you are essentially giving them a loan for which they pay you a specified interest every year. Just like other loans, this too should have collateral attached in the extreme event of a default.
You will know that there is collateral if the NCD issue is a ‘secured' issue. Check the collateral asset details in the prospectus. Usually for non-banking finance companies, the issues are secured against receivables.
You must also check the credit rating of the NCD; credit rating is given by authorized rating agencies to signify the financial health of a company and its potential ability to repay financial obligations. This has a direct bearing on your choice to invest in an NCD. A rating of AAA signifies the highest level of safety with a very high ability to continue financial payments.
“While the rating is important, keep in mind that the credit rating can undergo a change during the term of the NCD.” . If you are invested in a AAA NCD and the rating is downgraded, it can impact liquidity, making it difficult to exit and raises the risk of default.
It may be hard to dig into the details, but you can always work with your advisor and have a look at the financials of the company and more specifically, the free cash situation. Cash (on books) is indeed king if you are an NCD investor because a healthy cash balance signifies that the company will be able to meet its near to medium-term financial liabilities and interest payments without difficulty.
Also read: In 7 charts: How long-term holding mitigates interest-rate risk and ensures higher returns in debt funds
What you can avoid :-
While the interest rate offered has to be attractive, don't just chase returns. In the case of NCDs, understanding the default and liquidity risk is important. Default risk can be assessed with the help of the credit rating, whereas liquidity risk can be seen once the issue is listed on stock exchanges.
Along with the credit rating, to assess default risk, you have to consider the financial health, business growth prospects, and corporate governance of the issuing company. In the absence of this kind of research before investing, you are taking on the risk of losing your money. Ultimately, you are investing in one single company, which forsakes the advantages of having a diversified portfolio.
, “Ideally, investors should avoid concentration risk which comes with investing in a single company or issuer. Alternatively, diversification, daily price or fund value per unit, and professional management are benefits you can get by investing in a portfolio of bonds through debt mutual funds.”
NCDs come with a lock-in, which means you have to stay invested for the specified time till maturity, after which you receive your principal back. In the interim, you receive the contracted interest payouts. However, these NCDs are also listed on stock exchanges, which means you have the option to sell in the secondary market before the maturity of the bonds. Ideally, you should invest money in a way that the maturity matches your requirements and you don't have to sell before that. But liquidity through the stock exchange and secondary sale is somewhat like an emergency route.
Liquidity for NCDs is low in general and you shouldn't rely on the secondary market for an early exit. With a slight 50-75 bps compromise in yield you can get access to a portfolio of relatively better quality debt instruments in debt funds and there is daily liquidity too.”
Some bonds come with a monthly pay-out option; cash in hand may sound exciting. However, unless you need regular income, opting for the cumulative return option is better for compounding.
Interest on NCDs is taxable at your income tax rate, hence, you have to consider your post-tax returns not just the nominal interest coupon.
An additional red flag to watch out for is very frequent borrowing. If you are keen to invest in NCDs, then spread your investment across issuers. No single issuer should have more than 10 percent of your capital. Look at building a portfolio of NCDs factoring in your risk appetite and investment timeframe.
Lastly, while a long-tenure NCD of five years plus may offer higher returns, visibility on cash flow and financial health for such a long period is limited. Plus, locking in your money for so long might also mean an opportunity cost if interest rates head structurally higher.
Investing in corporate and NBFC NCDs can give your debt portfolio a lift in terms of returns, but you need to be mindful of details, not just of the issue but the company and its management. NCD defaults have been seen for large-sized organizations as well, hence, try not to be lulled into a sense of safety by the initial rating, rather keep abreast with key developments pertaining to the borrowing company.
If you want a higher return, there are no shortcuts, you must do your homework.

# InflaMatch Wealth Management # Fixed Deposits # NCD # Wealth Creations.