Make an estate plan

After building significant financial and physical assets, it is important to have a succession plan to distribute the estate on your death. The estate plan will typically comprise a will, designating heirs to all your self-acquired assets. Once you’ve made a will, you can update as circumstances change.

Re-evaluate your insurance cover

You could consider reducing your life cover at this stage when you have a reasonably big asset base. You can also re-direct the premium amounts to retirement investment options. The downscaling will obviously depend on the kind of policies you have. For instance, you can stop paying premium for term policies since they don’t have any surrender value. However, for other polices with surrender cash value, you would lose money. In case you want to bequeath money to your children or your wife, you could hang on to your life insurance polices. Your life insurance will be one of the first sources that will help your beneficiaries.

Preparing for regular retirement income

In case of annuities, you can buy them with investments made in a pension plan of a life insurance company, or from accumulations from other sources, like your stock investments. In the case of pension plans, the insurer will make a one-time tax-free lump sum payout of 25 to 33 per cent of your accumulation at retirement, and convert the rest of your accumulation into annuities, you can choose from different kind of annuities to match your requirements; a lifetime annuity or one for a specific period, say 15 Years. You can also opt for an annuity scheme where the payouts continue (in full or in part) to your spouse or heirs after your death. Alternatively, you could opt for deep discount bonds and small savings instruments like National Savings Certificate (NSC), which mature at regular intervals.

Ensure tax-efficiency

New retirees take a tax hit due to bunching up of the investments maturing around retirement. One of the ways to minimize tax outgo is to create an ‘income ladder’ so that your investments mature over 4 to 5 years after retirement. The mature investments can be re-invested yet again in the same instruments and thereby you can create perpetual annuities.

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