Sandwich Generation Planning For Retirement Early Amid Uncertainty

Equity as an asset class could be a very attractive avenue considering for retirement planning. Stock markets are volatile and if you can’t take tolerate the gyrations of individual stocks, then make an exposure through an index or ETF

The last week’s article on the survey has pointed some pertinent truths about retirement preparation and how the sandwiched generation must make amends to take control of this impending need. In continuation and adding my observations on this matter, the following article details on how one could be better prepared to their retirement needs particularly those aged in 40’s through 50, pursuing retirement at conventional age of 58 or 60.

About 20 years back when you were still in college or just having started the career, retirement seemed like a very distant goal has now reduced to 20 years or lesser. Suddenly, as realisation dawns, prominent questions creep up. Have I saved enough, would I be able to survive a job loss, would I be able to handle needs of aging parents and growing kids? And sandwiched between the needs of the next generation and the older generation, priority to your own was left to wind.

This is the generation which was jolted by the dot-com crash, the Great Financial Crisis and probably the once-in-a-century pandemic – Covid. This generation has endured the benefits of globalisation which also brought its own perils to the shore and now possibly approaching its nadir. Future, as uncertain as always is also now complicated. The loss of social safety net due to ever atomisation of the family has added owes further.

Budgeting: The most rudimentary form of attaining discipline is to draw a budget. A hands-on tab on income and expenses with clear distinction from discretionary to non-discretionary. This helps one to assess how they could control the excess outflows or even ignites to find ways to add income. This allows one to forecast the cashflows and accordingly help plan timing the expenses.

Learn to distinguish investment from savings: If you’ve not already realized, it’s time now. Savings are something one keeps aside which is a surplus from the earnings (post basic expenses) that are usually placed in a savings account. Investment is meant to provide returns on the money i.e., earn more out of the existing money.

Equity as an asset class could be a very attractive avenue considering for retirement planning. Stock markets are volatile and if you can’t take tolerate the gyrations of individual stocks, then make an exposure through an index or ETF. This is the cheapest and the easiest way to begin investing in the most proven and promising asset class. Allocate cash buffers: Though one might have a plan for everything, life remains dynamic and so could throw surprises. It needn’t always be unpleasant but even some pleasant ones. Having cash in hand or in a highly liquid avenue is critical to survive through these challenges. Provisioning for an emergency fund is most important considering the sandwiched needs we mentioned earlier. It, however, need not be in pure cash but even through cash equivalents and an unused credit card to tide over exigencies.

There’re no quick fixes: Remember that there’re no miracles but many overnight tragedies. So, avoid getting tempted to get rich-quick schemes or plots. Wealth creation happens in the long run and in the formula for compounding, the exponential factor is the time not the returns. Hence, be aware and don’t fall for those promises of higher returns in the short term.

Prioritize goals: There would be times when one has to trade-off between options and so it’s vital to prioritise commitments. These should be arrived based on their family circumstances, but care should be given to personal goals. Compromising on one’s own retirement could turn perilous in the future. There’re loans and debt available for almost all needs like children’s education, home purchase, etc. but not for retirement.

Seek professional help: Hire a qualified and trusted advisor to come up with a plan for the retirement. Acknowledge that not all should be done by yourself. A comprehensive financial plan helps to pave a road map outlining the overall goals, possible ways to achieve. Also, a third-party overview helps to act rationale during tumultuous personal and market situations. A good advisor would help alleviate taking decisions involving emotions.

Work on oneself: If you’re the bread winner, make sure you remain active, healthy and updated in your domain. Staying employable and healthy is highly profitable. Professional competencies should be upgraded regularly while physical health enables one to work productive and efficient.

Mid-life isn’t always a crisis but an opportunity to re-invent personally, professionally and financially.

(The author is a partner at “Wealocity Analytics”, a SEBI registered Research Analyst and could be reached at [email protected])