Investment Strategies In Retirement

When it comes to retirement planning there are various strategies available through which one can plan for retirement. However, which strategy to adopt is the biggest confusion among retirees. DSIJ evaluates various investment strategies for retirement.

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For many, retirement is the end of the earning period, unless someone chooses self-employment. Every retiree wishes to make the best possible use of the retirement corpus that he may have accumulated over his earning period which would help him earn a regular income till he survives.

However, there is a conflict between the need for safety and the need for growth to hedge inflation over the life of the retiree. A retiree having a very huge corpus may invest in a zero-risk investment portfolio that primarily invests in safe investments such as fixed deposits or liquid funds. For others, it is always a challenge on how to allocate the retirement corpus that outlives them. If he adopts a zero-risk portfolio, chances are high that he may outlive his retirement corpus. At the other end, although an equity portfolio comes with high expected returns, it also carries volatility which could eventually lead to self-liquidation if the withdrawals are continued when the markets are down. For example, if a retiree would have invested his retirement corpus in the mid-cap or small-cap fund during 2017, he would have been forced to book losses to get a regular income. So, this calls out for an appropriate investment strategy which would mean investment in the right mix of assets based on the individual risk profile that would help the retiree not only get the desired withdrawals but also ensure his funds last beyond himself.

The debate always revolves around how much people have saved or how much they have set aside for retirement. However, the focus on savings amount is missed. It is to be understood that planning for retirement is not just about achieving some magical retirement corpus number, but also about generating enough cash flows to meet your financial goals, needs and wants. Before diving straight into investment strategies for retirement, it is important to understand how much you need for retirement.