Life Begin's After 50

If you fall under this category, go for a conservative asset mix & adequate cover while securing your finances.

In today’s world, it’s a Herculean task to fulfil all your family responsibilities. It takes all your savings and emotions to make sure that your kids find their feet in today’s highly competitive world. And when these fledglings finally spread their wings and move on, you find yourself emotionally and sometimes monetarily drained. Take the case of 51-year-old K D Sharma. Within a few months of their daughter’s wedding, their son also decided to move out. The couple suddenly realised that now they are financially strained. Their life-long savings been utilised for securing the future of their kids and it appeared that they have to start afresh. So, if you are also undergoing through the same pangs, here are some tips that can help you chart out a new chapter after you’re done with all your responsibilities. 

Asset Mix 

Considering that most empty nesters belong to 50+ age category, financial planners recommend a conservative asset allocation, which could comprise of up to 30% allocation to equities. While current income generating securities such as small savings schemes, fixed maturity plans, and long term bank fixed deposits can form 50% of the asset mix. The remaining investment (20%) should be made in fixed income securities with low maturity such as short-term income funds, liquid funds and short-term bank fixed deposits with an objective of maintaining liquidity for contingencies. The main priority for empty nesters is to preserve existing wealth and plan for retirement. Hence such a mix would generate growth with added stability apart from current income.

However, analysts caution that it may not be appropriate to implement the same asset allocation across investors as conditions differ significantly across empty nesters. For the uninitiated, asset allocation for any investor is determined based on the investor’s age, socio-economic background, lifestyle, risk appetite, liquidity requirements and finally the investment horizon. 

On the equity market investments, financial planners believe that the exposure should be restricted to a complementary blend of three to five quality diversified equity funds with low risk. And they should avoid the temptation of sector/thematic funds or/and a direct exposure to equities by purchasing individual securities. The investor should view equity exposure as a long-term asset class in the portfolio and hence a systematic investment plan could be the ideal strategy for investing in equities.
 

Financial planners also advise such families to set aside at least three months household expenses as contingency fund, which ideally should be risk-free and can be easily liquidated. It is pertinent to calculate amount needed to meet living expenses for remaining life, amount needed for charity or passing on to the family members. You should not wait till the end for such decisions. 

Adequate Cover
 

Insurance advisors suggest protection against early death, disability and medical coverage as important insurance covers an empty nester must have. Normally being on the other side of 50’s, the insurance premia for such insurers is very high. Some unit linked insurance policies offered by private sector insurance companies provide both medical and life insurance coverage, which empty nesters could look to take cover under.
 

Since being on their own, empty nesters have significant amount of extra time and cash to pursue long cherished interests and hobbies or some new activities. So while pursuing these interests, it is advisable that they should fine tune the financial plans to accommodate the new lifestyle. The biggest mistake people make after the kids leave the house is not reviewing the insurance policies. What they forget is that it’s one of the key times to look at insurance and plan accordingly.
 

According to Aggarwal, a whole-life Ulip will be the ideal cover for such category of people. Choose a product with lesser premium paying commitment of maximum 5-10 years and coverage for whole life with asset allocation of 50% in Debt and 50% in Equity. You can also use these policies for tax-free retirement planning since such a product gives you the flexibility of liquidity every year. They also advise a second look at your health insurance. It is important that you should have enough coverage as it may become difficult to take larger cover after certain age.

It’s Never Too Late

A conservative asset allocation, comprising up to 30% equities, is recommended Current income generating securities such as small savings schemes, fixed maturity plans and long-term bank fixed deposits can be 50% of the asset mix Around 20% can be put in fixed income securities with low maturity such as shortterm income funds, liquid funds and shortterm bank fixed deposits Choose an insurance product with lesser premium paying commitment of maximum 5-10 years and coverage for whole life