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Safety in retirement planning

business Updated: Feb 08, 2008 00:16 IST

One of the main things that people look for is safety in terms of their retirement planning. Everyone wants to ensure that they have made their position safe by ensuring that their money that is set aside for retirement planning is invested without much of a risk. There has to be a close look at this strategy because of the fact that it can be counterproductive in some areas so the right way has to be adopted in completing the process.

There is no doubt that there has to be a safety angle when it comes to the question of undertaking retirement planning. The point that has to be decided is the extent of the emphasis on safety. Everyone would like to have a certain amount regularly when they retire. If you have a high income and high savings then this might be possible but in most cases of retirement planning achieving the goals with the existing amounts without taking risks is not going to be possible. Therefore there has to be a fine balance on the safety aspect.

Age factor
The age factor is a very important consideration in the entire issue. If a person is quite young or there is quite some time to go before retirement, then sticking to just safe areas might not be the best strategy. With the long time period at their disposal a person can ensure that they have made the right investment in various areas. There has to be some chance that their invested amount grows over a period of time to result in a higher retirement corpus.

Instruments and composition
Most people rely on insurance and even fixed deposits to build up their retirement corpus.
There are two things that might be missing out in this process. One is that the insurance might seem to be a safe route but if this is a unit linked scheme that is investing in an equity option then the nature of the investment changes and the instrument is no longer a safe one because there is no guarantee of the return. The other thing is, if there is too much reliance on fixed deposits then the growth will be restricted.

Route to be followed
A balanced route is often the best route that is applied for retirement planning. This is done so that the debt part will help in stability and steady growth of the portfolio while the equity part will provide an opportunity for the individual to grow the corpus and achieve the goals set for retirement.

The exact mixture to be adopted will depend upon the specific case for each individual.

(The writer is a certified financial planner)