Planning your finances for the semi-retired life

Roshni Singh (name changed) is in her early 60s. She crossed the retirement milestone three years ago and realised that sitting idle completely for the rest of her life wasn’t something that seemed very enticing. Singh, who worked as a chartered accountant at a government organization now runs a full-fledged coaching center. “What started off in a fit of boredom has become a newfound profession for me. I started teaching youngsters in my neighbourhoods who were trying to ace the chartered accountancy examination in a bid to kill time. Much to my surprise, I enjoyed teaching and the students enjoyed my classes equally. Requests started pouring in to accommodate more students and I realised maybe this was my call to switch to a semi-retired life from being retired,” quips Singh.The trend of being ‘semi-retired’ is finding resonance with a growing coterie of people who are either already retired or are about to join the retirement league. Instead of making the drastic shift of being on the hamster wheel of the nine-to-five grind to dropping out of the workforce completely, many people are choosing to transition into an apparatus where they can continue working but with fewer hours and into vocations that are less demanding and stressful. While people like Singh chose the semi-retired life owing to the realization that sitting around doing nothing may not be the best definition of a fulfilling life, there are others who are jumping on to the semi-retired bandwagon because retirement incomes are proving insufficient.Singh says, “When I retired, I had no plans of rejoining the workforce. My pension was sufficient for me and my husband who runs a business and I had judiciously saved and invested for this phase of life during my younger years. Things took a mild turn for the worse when the pandemic struck and my husband’s business suffered losses. While circumstances weren’t so bad that I had to consider joining the workforce in a full-fledged manner at the earliest, the remuneration that I received for conducting tuition classes came as a blessing. That also served as a nudge for me to take this up seriously. Besides keeping me occupied, the classes have also improved our financial condition.”If Singh embraced the semi-retired path due to the combined effect of happenstance and need, there are many who are choosing the semi-retired life before hitting the age of 60. Burnout from decades spent in stressful jobs are pushing many to opt for a more laid back professional apparatus. However, in such cases the shift is only feasible if a solid financial safety net is already in place that minimizes the impact of leaving the workforce earlier. Deepak Chhabria, CEO of Axiom Financial Services says, “The intent behind semi-retirement or early retirement is to enjoy and engage in what one cannot do during full time employment.If planned and executed well, this can be a blessing, however, if the planning is poor and execution imprudent, the outcome can be disastrous. A lot depends on the age at which a person is planning to slow down from active work, the corpus already accumulated and the expenses. If the equation based on all these variables is right, one can confidently make the move.Financial planning while leading semi-retired is as important as planning for retirement. In fact, the right financial strategies can not only improve the quality of lives but semi-retirement can also provide a window of opportunity to make up for the mistakes that you may have made in terms of planning your finances for retirement. Singh narrates, “Since I started teaching, I have been investing in SIPs in mutual funds. Prior to retirement, I had always invested in safe, risk-free financial instruments and as such, my investments have fared poorly considering inflation rates. I didn’t want to repeat those mistakes and thus I started investing in equity mutual funds so that I can earn good returns and accumulate sufficient capital over the next few years.”For those choosing to slow down before actually touching the retirement marker, diligent investment planning can make it easier to settle into the semi-retired groove. A thorough review of current expenses, liabilities, financial goals and the performances of the assets in your current portfolio is the first stepping stone for achieving the goal of a semi-retired life. Eliminating debt burdens at an optimum pace can ease up funds at your disposal which you can channelize into a mix of debt and equity mutual funds so that you have a sufficiently strong financial reservoir to smoothen the transition into a semi-retired life. Your investment plan should also factor in your existing retirement corpus, your approximate incomes when you are semi-retired and most importantly the impact of inflation.Chhabria advises, “Since, the period of retirement can be long, the accumulated corpus and the income from part time employment should be substantial. The biggest risk one faces is to run out of money or face shrinking income during this period. However, the option to resume full time work, to make up for the shortfall at a late age may not be available. Inflation can be brutal and make the best laid plans go awry and so the solution is to dabble with higher-risk avenues risk in the beginning and progressively bring it down. Be prepared for the chaos, but ensure it is orderly.”Key takeaways- Amp up your insurance coverage for yourself and your dependent before walking down the semi-retired path. Life expectancies are on the rise and the lack of sound medical and life covers can wreak havoc on your finances.- The right financial strategies can not only improve the quality of lives but semi-retirement can also provide a window of opportunity to make up for the mistakes that you may have made in terms of planning your finances for retirement.- A thorough review of current expenses, liabilities, financial goals and the performances of the assets in your current portfolio is the first stepping stone for achieving the goal of a semi-retired life.- Have a solid emergency fund ready so that you can sail through periods of uncertainty or income disruption after you have quit your full time job.- Eliminating debt burdens at an optimum pace can ease up funds at your disposal which you can channelize into a mix of debt and equity mutual funds so that you have a sufficiently strong financial reservoir to smoothen the transition into a semi-retired life.This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.