5 Tips for Managing Your Retirement Savings When Living on a Fixed Income

Life After Retirement: Here's Why Finances Should Be the Least of Your  Worries - BusinessToday - Issue Date: Mar 20, 2022

Living on a fixed income, i.e., being restricted financially may sound like an oxymoron. After all, who can imagine living day to day without any financial flexibility? But what if you’re not even able to save anything for your future retirement? Unfortunately, this is the reality for many lower-middle-class individuals in India.

According to a study commissioned by the Financial Access Users Survey (FASS), only about 5% of households in India save any money. Even though it is great that the majority of Indian households don’t save money yet – investing for the future and setting aside money for retirement has always been a significant challenge for most Indians. And, as it turns out, fixed incomes are often a big factor in why people aren’t able to invest their hard-earned money wisely for the future.

So, we bring to you 5 tips on retirement saving while living on a fixed income.

1) How much should you be investing for your future?

This is one of the most important questions you need to answer when you’re trying to figure out how to manage your retirement savings on a fixed income. You need to start by figuring out how much you can save. However, because of the many factors that can impact your retirement savings, you also need to answer a few other questions.

What is your income? Will you have health issues in the future? Are you hoping to have a child in the future? Depending on these factors, you may need to increase your savings. While it is true that you have to consider the future, you also need to consider your current lifestyle and the immediate needs of your family.

When you’re trying to figure out how to manage your retirement savings on a fixed income, it is reasonable to assume that you will have a certain amount of money coming in every month. It may be a full-time job, or you may be receiving a monthly social security/government allowance. You may also have some savings that come from gifts and/or inheritances.

You then need to figure out how much of this money you will need to live on. There are a few ways to do this.

2) Start with an emergency fund

This is the one thing you should never sacrifice when you’re on a fixed income. No matter how much money you’re making, there will be times when you will need money immediately. An emergency fund should be enough money to cover your immediate needs.

Make sure you have enough money saved up to cover your car repair, your roof getting repaired, and other major emergencies. This will give you peace of mind and help you avoid debt. If you don’t have enough money saved up to cover major emergencies, like a car repair, your credit card may be causing you a lot of trouble.

Many credit card companies charge hefty interest rates. If you don’t pay off the entire balance by the due date, the interest will start building up. If you don’t pay off your credit card bill, the credit card company may take legal action against you. If you don’t pay your credit card bill, you may be charged huge fees and penalties.

3) Take advantage of employer-sponsored retirement schemes

While these are not necessarily retirement savings, it is worth mentioning because many employers may offer this benefit to lower-income employees. Most companies will provide some kind of retirement funding, such as a 401(k) or a pension plan. This is a great way to save for the future because you don’t need to worry about investing. It is generally managed by your employer and has many tax advantages.

4) Set up a non-formal investment account

You may be surprised to learn that in India, most Indians don’t have any kind of long-term savings. If you are looking for a simple way to start investing on a fixed income, a non-formal investment account may be your best option.

Most banks and financial institutions offer this type of account, and you don’t need to open a separate account. You simply open an existing current account and make a small deposit of a few hundred rupees. The money you deposit will grow and be available to you in as little as three months. With a non-formal investment account, you have complete control over your money.

You have the option to take your entire deposit back at any time and close the account. There are no fees associated with non-formal investment accounts. However, you need to be careful because banks and financial institutions can impose various restrictions and administrative burdens. For example, you may have to provide a lot of documentation if you are investing in a stock market-related product.

5) Focus on long-term investments

As a general rule, try to invest only 10-25% of your savings in stocks and bonds. This will help you to maximize your return while keeping the risk as low as possible. When you’re living on a fixed income and trying to manage your retirement savings, it is important to focus on long-term investments. This will help you to avoid unnecessary risks and will help you to make the most of your money while it is saved.