Retirement is a time of life when individuals need to be financially secure in order to maintain their standard of living. However, there are additional financial risks that retirees need to consider, such as health, inflation, and investment. Mr. Pramoth Rajendran, National Director of HSBC Vietnam’s Personal Finance and Wealth Management Services Division, emphasizes the importance of considering these risks and planning accordingly.
Retirees have different life expectancy and standard of living expectations than younger individuals. Still, everyone faces common challenges in retirement. These challenges include ensuring steady cash flow for daily expenses, planning for a long life, dealing with inflation, investing wisely, and covering medical costs.
It is crucial for retirees to plan for maintaining regular cash flow for daily expenses while also anticipating any unexpected issues that may arise post-retirement. To do this effectively, Mr. Pramoth Rajendran recommends considering three key risks: longevity, inflation, and investment.
Longevity risk refers to the financial challenge of living longer than expected and facing increased expenses due to medical costs or unexpected events. With advancements in medical technology making it more common for people to reach the age of 100 or older, it is essential to have savings and retirement resources that can cover daily living expenses in case you outlive your financial means.
Inflation risk poses a threat to retirees as rising living costs can erode savings if investment returns do not keep up with or exceed inflation. Therefore, it is crucial to have an investment portfolio that addresses inflation risks while generating regular cash flow to meet daily living needs.
Investment risks associated with retirement planning involve balancing risky assets like stocks with lower-risk assets like bonds. Retirees need to find a balance between these two types of investments in their portfolio while considering annuity insurance and health coverage as additional tools to help mitigate potential risks.
In conclusion, retirees must consider all aspects of their financial situation carefully before retiring fully. They should plan for steady cash flow while taking into account potential risks such as longevity risk and inflation risk. Additionally, investing wisely through diversification can help mitigate potential risks during retirement planning.
