Unit 4: Retirement & estate planning

Retirement planning is determining retirement income goals and the actions needed to achieve them — estimating expenses, identifying income sources, building a corpus and managing it after retirement.

Nature

• Long-term: starts early, spans decades.
• Inflation-sensitive: expenses at 60 will be much higher than today.
• Compounding-driven: early start makes a large difference.
• Two phases: accumulation (working years) and distribution (retired years).

Importance

• Rising life expectancy — 20–30 years of retirement.
• Nuclear families — less dependence on children.
• Rising health-care costs.
• Few people have a pension; most must build their own corpus.
• Financial independence and dignity in old age.

Scope: expense estimation, income replacement ratio (usually 70–80% of pre-retirement income), health-care planning, debt-free retirement, post-retirement investment strategy.

Estate planning is arranging for the management and transfer of a person's assets during their life and after death, in line with their wishes, with minimum disputes, delays and costs.

Nature and scope

• Covers all assets — property, bank accounts, investments, insurance, business interests, digital assets.
• Covers liabilities to be settled.
• Includes provision for dependants, especially minors and differently-abled members.
• Uses legal documents and structures.

Importance

• Ensures assets go to the intended people.
• Avoids family disputes and litigation.
• Provides for minors and dependants.
• Speeds up transfer and reduces costs.
• Ensures continuity of a family business.

The will

• Made by a person of sound mind and 18 years or older (the testator).
• Must be in writing, signed by the testator and attested by two witnesses.
• Registration is optional but advisable; it can be revoked or altered (codicil) any time.
• Appoints an executor to carry out the instructions; probate is court certification of a will (needed in some cases and cities).

Other documents

• Nomination: a nominee is generally a trustee or receiver of the asset; legal heirs under a will or succession law may claim it (except under specific rules for shares and insurance "beneficial nominees").
• Private trust: useful for minors, special-needs dependants, protecting assets from disputes.
• Power of attorney: general or specific; ends on the death of the principal.
• Asset inventory and record of documents: list of all accounts, policies, property papers and passwords.