It is critical to control discretionary expenses such as those on travel and entertainment. A common mistake many newly retired people make is of spending their savings corpus on a house or on other fixed expenses. Consequently, there is inadequate money to meet variable expenses like medical bills. Try to live off interest, dividends and capital gains, keeping capital untouched for as long as possible.
Maintain risk coverage
Ensure that your funds will cushion you through your expected life span. If you’re falling short, buy a life annuity to cover much of your risks. However, annuities won’t protect you against inflation and the transaction costs of annuity products may be disproportionately large. Once you have got a good idea of the risks you face in retirement and the requirements of a retired life, you are ready to manage your retirement funds.
Tap tax-free funds
Use your tax-free retirement funds first like Employees’ Provident Fund (EPF), superannuation schemes and gratuity payments to meet regular expenses and reinvest the rest. Another attractive source of tax-free retirement funds is the PPF and the lump sum payouts of pension plans.