Real returns: A few good things to do 3 years before retirement

A lot of hard work is involved if you wish to retire with financial comfort

Most folks have a clear picture of what they plan to do after retirement — sleep late, catch up on Hollywood flicks, travel, spend time with the children.

But to get to that relaxed state after retirement, you need to put in groundwork in the run up to it. Assuming you’ve been investing towards retirement, here are five things you need to do three years before D-day.

Take stock

When you start investing towards retirement in your 20s or 30s, you make a whole lot of assumptions about your income growth, savings, returns, inflation and living expenses after retirement. But real life seldom mirrors excel spreadsheets. That’s why three years before retirement is a good time to take stock of your likely retirement corpus.

To do this, add up your accumulated balances in EPF, PPF and NPS, the market value of your equity and mutual fund holdings, sums in small savings schemes, banks and any significant investments in real estate or gold. Exclude the value of the house you occupy and the money you need towards specific goals such as your children’s post-graduate education.

Deduct outstanding loans. What you are left with is the sum you’ll have to rely on for your income post-retirement. By now you will also have a good idea of how much you’ll need to meet your living expenses.

If you can meet them by withdrawing just 3-4% of your corpus, you’re well-placed to retire.


If your invested corpus looks as if it will fall short of your needs, try and add to it by unlocking value from neglected assets and squeeze out a higher return from your existing savings. You may have bought a plot in the early years of your career or an apartment you’ve locked up for years, consider selling them to raise cash. If you have unused jewellery and silver lying in your bank locker, consider liquidating them, as that will not just unlock cash but also save you on locker rent. Taking greater care with your financial management and being prompt with your investing decisions can also add to your retirement kitty. For instance, instead of idling money in savings accounts, setting up a sweep to plough it into fixed deposits.


The investment vehicles that you use to earn an income post-retirement need to be very different from the ones you used to accumulate the corpus. Three essential attributes for your post-retirement investments are capital protection, regular income and liquidity.

This may call for a portfolio rejig. Rejigging a large portfolio requires time and favourable market conditions, so it pays to initiate this process well ahead. Exiting your equity investments in a phased manner well ahead of retirement will ensure that your entire corpus isn’t exposed to a market fall just when you need it the most.

If your current portfolio is equity-heavy, three years before retiring is a good time to start selling the equity portion to buy more debt options so that you have more capital protection. Depending on your risk appetite and return needs, you can opt for different mixes of equity and debt (30% equity, 70% debt, or 20% equity, 80% debt) in your post-retirement portfolio.

Liquidity and ease of monitoring will be important to you after retirement. So, if a good part of your net worth is invested in real estate, land or gold, it is best to initiate their sale three years ahead so that you can switch to financial assets. If you are planning to rely on mutual funds with an equity component for regular income, the investment must be made 3-5 years before retiring. Then your portfolio will have some time to accumulate returns before you begin to withdraw from it.


For stress-free retirement, it is best to start off with a clean slate on liabilities. Loans and EMIs also rob you of flexibility post-retirement as you will be forced to sacrifice part of your income towards the repayments. Therefore, it’s a good idea to repay all your liabilities before you retire.

Use your accumulated savings to repay outstanding loans ahead of retirement. If you have limited money at your disposal, repay your high-cost loans first such as credit card debt and personal loans. Your car loan and housing loan can follow.


Two kinds of risks that can totally upend your financial life after retirement are medical emergencies and natural disasters. Therefore, folks who have been used to a liberal health insurance cover from their employers during their working years, need to buy a comprehensive health insurance plan of their own before they retire. Doing this a few years before retirement makes sense because the younger you are, the cheaper your health insurance premium and the more options you get to choose from.

Most health insurance plans insist on a waiting period of three years or more before they begin to cover pre-existing diseases. On this count too, buying health insurance three years ahead of retirement makes sure that you are fully covered for any health complications as soon as you retire.

If your family members or parents were covered by your employer, you may need to take care of that cover too, before you retire.

Apart from health insurance, property insurance is another form of protection that is quite useful to get before retirement. In the Chennai floods a few years ago, many retired folks had to replace most of their belongings at one go after their homes were ravaged by the natural disaster.

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