Retirement planning has become a difficult and nightmare decision making in the past decade as well as now currently. The GFC of 2008 destroyed many careers and pays and wages came down to the lowest level. The current pandemic has already destroyed the household balance sheets. Goal planning has been stopped and most of the SIP investments have been cancelled or have been stopped for the time being.
Many clients sold their investments to repay their loans so that they don’t have to carry the burden of EMI the impact of salary cut on the same. This insight forms us might look like very blunt but we have raised one of the toughest subjects and topics to discuss on broader terms. Financial planning or education planning or houses hold debt management which one to be given priority and how the allocation of priority needs to be given is a subject of deep thought. Where to compromise and were not particularly for the salaried person
Most of the clients were keener to find the option of how to place a Pause button on the SIP which is getting deducted every month form salary. No wealth manager or financial planner can help you to achieve the goals which you have decided within the previously decided time frame. All your goals and their time frames are now to be extended. No equity or debt or any asset allocation will not work. This insight throws the light on those grey areas which are still not covered in these times by any financial advisor. Well you need guts to speak the truth and give a clear picture
Every company has now come up with variable component of salary where the same is lined with the target. Now practically speaking FY-21 targets are hardly going to be achieved. Now, due to the change of salary structure where the fixed components have been brought down to the range of 10% to 30% makes life difficult for any financial or goal planning. Even the household expenditures are being reduced and so as any decision or goal decided with a prefix time frame. The horizon has now been stretched simply by another 5 years. The number of 5 years comes from this theory that next 2 years of Indian economy will be gone for repairing the damage. Now the next 3 years will be to get back quickly on the pay scale and wage scale and then repair the gaps of the goal planning shortfall.
Now the biggest question which comes in mind which goal to be prioritized when these pandemic situations of GFC comes up. Well, goals like child education should be given more priority than any other goal. As a parent, it’s our responsibility to keep their education goal and planning’s to be on the top priority irrespective of any other sacrifices.
Planning for retirement and retirement goal planning should be the next one since in a country like India we don’t have social benefits to take care for the retirement phase of our life. The current circumstances have simply thrown away the retirement planning concepts. Another key threat is that living for too long post-retirement. Fixed income instruments returns have come down significantly and the threat of credit risk cannot be avoided. The biggest problem is the earning post-retirement and the dilution of savings. Medical cost and insurance cannot be managed through black marketers who charges Rs 10000 for 3 km distance for an ambulance and you don’t have any option but to pay.
Hence you need a much higher level of medical insurance since your financial advisor never thought that apart from inflation the black market players play their dice judiciously in time of pandemic type situations.
All vacation planning goals and buying a house or car are now to be postponed or to be extended from the previously decided time frames. The salaried class is the most affected and the biggest worst fate is that those who are into wealth management and advisory business are the worst effected from the pandemic. Non- the salaried class can revive back within 2 years but for a salaried person, the revival is going to be a long period of time. Middle-level management is getting replaced with lower-level candidates and this risk of losing job and the threat of competition is getting amplified. The fragile job market for the salaried class and their financial and goal planning is facing a nightmare. Clarity and road map is required to manage the goals and where to focus is highly required.
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