Verily verily, read these retirement tips—Part I

Last week we discussed on where one can start in planning for retirement. We did point out that three important questions have to be asked initially and throughout the retirement plan’s life: what do you need for retirement? What do you have for retirement? What can you do if you fall short of your goals?

This week, we will discuss the commonly missed retirement planning tips. If you are ready to retire or need just a bit more to help bridge the gap in your retirement funding, there might be some things you haven’t considered that can help you raise additional retirement income or otherwise help meet your retirement goals. The following are the five most commonly overlooked retirement planning issues and suggestions on how to handle them.

lBorrow while the borrowing is good. Banks are fair weather friends that love to lend you money as long as you are pulling down a steady salary. After you retire though, banks become skittish when you apply for a loan because they question your ability to repay the loan without the help of a regular paycheck. So, make sure to get your borrowing out of the way before you retire.

I should be quick to warn though that unlike banks, for my Malawian friends in diaspora, credit card companies will continue to encourage you to take on more debt than you can handle even if you are nearing retirement. However, you must resist the temptation to increase your level of credit card debt just before retirement.

lRegularly carrying a large unpaid debt from month to month causes a big strain on a person’s financial resources even when the person is fully employed. That strain only increases after you retire and are no longer earning a paycheck.

A penny saved is a penny earned. Prior to retirement, find out the best way for you to invest the money from your company retirement/pension plan. Taking the money and hiding it in your mattress or in a savings account earning around four percent interest each year are not good options. Instead, consider transferring your company retirement plan money into a portfolio of assets that offers you higher returns. For example, buying treasury bills and a mix of stock and bond mutual funds as well as investing in property could get you into high rewarding passive investments. Visiting stock broking firms and indeed most of the Banks will give you pointers on which stocks are more lucrative on the Malawi stock market currently.

lTap into your investments wisely. If you follow the advice of most investment advisers, you should have a balanced investment portfolio that includes a diversified collection of stocks and a mix of short-term and intermediate-term bonds. Again my advice is that if you plan on leaving something for those that remain behind after you die and you can afford to do so, consider holding on to stocks that have appreciated a great deal in value. With certain exceptions, those who receive such stock from your estate will get it at the then current fair market value, not at the value you originally paid for the stock when you acquired it. This means that if the beneficiary later sells the stock, he or she essentially avoids having to pay capital gains tax on the appreciation of the stock during your lifetime.

Wakutsina khutu ndi mnansi (don’t say I didn’t warn you). Blessed week-end to you and yours.  n