5 Financial Risks That You Face When You Retire Early

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If you are thinking of retiring early, you need to do thorough planning of your finances. There are many risks, especially with sudden and unwanted expenditures that could arise. Here are 5 risks that you could encounter when you retire early, so you need to make sure that if you have retired early, you have a lot more in terms of assets to back such a decision.

Inflation will eat into your money

If the years that you survive after retiring is characterised by very high inflation, you could well be in trouble. Inflation eats away into your income and this could pose a problem in the years ahead.You could be left with very little monthly income for sustenance.

Plan for longer survival

Life and death is in God's hands. If you live for a long time, it's possible that you could be cash strapped in very old age. If you retire at 50 and live until 90s, you would need lots of money to sustain for 40 long years.

Falling interest rates

A lot of retired individuals put money in monthly fixed income yielding securities. If interest rates in the economy continue to be lower and you depend on fixed interest rates for survival, you could be in trouble. If you have parked say Rs 50 lakhs in fixed interest and use the same and interest rates fall, your earnings could drop.

Plan for medical emergencies

If you have not planned for proper medical insurance, this could be a big drain on your financial resources.

Healthcare expenses have gone up dramatically in the last few years and you need to anticipate them before you retire. Make sure you have covered yourself adequately, before you even think of retiring.

Anticipate major expenses

If you retire early and have not planned for a son's and daughter's higher studies expenditure or a major event as their marriage, you could be in trouble. Both these heads take a lot of your money and before you realise your resources could be drained.

Read more about: financial planning
Story first published: Tuesday, October 21, 2014, 8:39 [IST]
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