For some reason, lately, there have been a lot of questions about retirement planning and what to do with the money you get after retirement, and I think this topic deserves a mini series. Today, I’m going to write about three things that have been on my mind about this. Before I begin, for context, here is the full comment that prompted this post.
biswas July 10, 2012 at 7:37 am [edit]
There are many articles on how to plan for retirement.It will be nice if you can discuss on how to plan once one is retired.I am likely to retire in couple of months.I will receive a large lump-sump amount.I don’t know what to do except for FD.An article on this topic will really be appreciated.
As someone whose retirement is still a few decades away it is hard for me to really get into the shoes of someone who is retiring in a couple of months, so I’m going to write about three lessons I’ve learned from my elders who have already retired and made some good and bad financial decisions.
1. Don’t seek excitement in the stock market: A few years ago when online trading had still not caught on, it was quite common to go and sit in your broker’s office and execute trades. I used to go to my grandpa’s broker at the time and was surprised at how many retired folks “play” the market. In the end, none of them made any money, and most lost quite heavily, so if you’re seeking excitement in the stock market, that’s the last thing you want to do with your retirement savings.
2. Lock in your money in big investments: Someone in our family who was retiring soon told us over dinner that his elder brother who retired many years before him gave him this advice, and I think this is perhaps relevant to a lot of families.
His elder brother told him that over the years his retirement savings had been eaten away by giving small gifts and loans to people in need and the fact that people knew he had the money, made them approach him and talk him into sharing it with them.
He suggested that one way of avoiding this situation is to put your money in places and in chunks where it really hurts to give them away, breaking a fixed deposit of Rs. 5 lakhs is a lot more painful than writing a check for Rs. 50,000 from your savings account. Sounds like great words of wisdom to me.
3. No one knows any secrets: A friend’s dad only invests in post office schemes and bank fixed deposits and he is never tempted to make great returns on a swanky new insurance product or the stock market or anything else that’s hot at the moment. His philosophy is simple, there is only so much money you can make with money, so don’t get sucked into dreams of doubling or tripling your money in a year or two. No one knows any secrets.
When you think of all the smart people that invested with Madoff and never chose to question his returns, it’s obvious that there was an implicit assumption that somehow Madoff knew a secret that the rest of the market didn’t. That kind of thinking is at least part of what led them to believe in the Ponzi scheme. I think it’s wise to assume that no one knows any secrets, specially when dealing with all your retirement savings. Playing it safe is better than assuming that someone has access to a golden goose that he’s willing to share with you.
Finally, since I didn’t talk about any products, here is a link to an older post with a list of some safe investments that seem appropriate for this situation.