If you belong to the HNI category in India, congratulations, as you are among the top 1% population of the country. However, just making money is not enough, you need to save and invest it strategically too to secure your retirement. So what are your options? Where should you invest to secure your financial future and ensure that you can maintain your lifestyle and that of your family too? Check out this blog to know more about retirement planning strategies for HNIs that can help you shape your investment portfolio.
Read More: 10 Tips for Successful Retirement Planning
Why is retirement planning for HNIs important?
Retirement planning is essential for every individual. It is like preparing for a time when you won’t be working anymore, but you still want to enjoy a comfortable and worry-free life. Particularly for HNIs, retirement planning ensures that they can maintain their existing lifestyle even in their retirement which may include frequent vacations and a leisurely lifestyle. However, there is more to retirement planning for HNIs.
Retirement planning also ensures that savings and investments grow enough to keep up with rising costs like medical expenses without putting a strain on the financial situation of the HNI. HNIs usually have diverse investment portfolios, including stocks, real estate, businesses, and more. Proper retirement planning helps optimize these assets for a smooth transition into retirement.
Furthermore, HNIs often have a desire to leave a substantial inheritance for their children or charitable causes. Retirement planning allows them to allocate resources for these purposes while ensuring their own financial well-being. For HNIs, handling taxes and investments can also be tricky. Retirement planning helps them find ways to pay fewer taxes while using their retirement money wisely. It also helps them deal with stock market fluctuations, ensuring a steady income even when markets are uncertain.
Retirement planning strategies for HNIs
Retirement planning is a series of investment decisions with the aim to ease retirement and ensure a smooth transition of business, property and legacy to the next generations. Some of the popular retirement strategies for HNIs are explained hereunder.
Creating a retirement budget
This is one of the primary steps in retirement planning for any individual and HNIs are no exception. Creating a retirement budget is especially important for HNIs to evaluate their financial needs, maintain their lifestyle, carry on their pet projects in their retirement, etc. and allocate sufficient resources towards the same. While this needs careful analysis, HNIs can use a retirement planning calculators available online to have a rough estimate of their income and expenses in their retirement and plan accordingly. It is important to account for factors like inflation, healthcare costs, taxes, emergency fund, etc. while carrying out this activity.
Diversified Investment Portfolio
High Net Worth Individuals adopt a strategy of diversification in their investment portfolio. By allocating funds across a variety of asset classes, such as equities, fixed income, real estate, and alternative investments, they aim to mitigate risk. This approach is based on the principle that different asset classes have varying levels of correlation to market fluctuations. As a result, if one asset class underperforms, the potential losses can be offset by the performance of others. Diversification helps HNIs achieve a balanced portfolio that balances growth and stability over the long term.
Investment bucket strategy
HNIs can implement the investment bucket strategy to organize their assets based on distinct time horizons and risk levels. They segregate their investments into different “buckets,” each designated for specific financial goals. Short term buckets cater to immediate needs and emergencies, holding liquid assets with low risk. Medium-term buckets consist of investments aimed at medium-range goals, such as education expenses or buying property. Long-term buckets are designed for retirement and wealth growth, typically invested in higher-risk, higher-return assets. This approach facilitates efficient management of funds while aligning investments with individual goals.
Asset protection strategies
Preserving wealth is paramount for HNIs and should be part of their retirement planning. Therefore, it requires employing sophisticated asset protection strategies. This may involve establishing trusts, limited liability companies (LLCs), and family limited partnerships to shield assets from potential risks and legal claims. By segregating assets and creating legal barriers, HNIs safeguard their wealth and ensure a smoother transfer of assets to heirs or beneficiaries as well as safeguard their interest in their retirement.
Seek professional advice
Retirement planning can be complex and challenging, especially for HNIs who have multiple sources of income and assets. Therefore, it is advisable to seek professional guidance from a certified financial planner, who can help them design a customized retirement plan that suits their goals, risk profile, and preferences. A financial planner can also help in monitoring the retirement plan and make suitable adjustments as and when needed. HNIs can login to their Fisdom Private Wealth account to get personalized assistance in their wealth management and retirement planning to get the perfect blend of wealthtech and professional wealth managers’ guidance.
What are the factors to consider when planning for retirement for HNIs?
Retirement planning for any individual is centred around meeting a few basic criteria. These factors are highlighted hereunder.
- The primary consideration while planning for retirement is by defining and assessing the current financial position, retirement goals and the expected income level needed in the retirement phase. This clarity is essential in effective retirement planning and ensuring that all the goals are met in due time.
- Another important factor to consider is the rising inflation and the expected income level required 20 or 30 years down the line.
- The age at which you start retirement planning also influences retirement planning. If retirement planning is started at a very early stage, it gives HNIs more flexibility in choosing retirement options and meeting their goals in a cost-effective and time-bound manner.
- It is equally important to perform time-to-time rebalancing of the portfolio to ensure that it is updated and modified to meet the changing or evolving needs of HNIs as well as weed out the investments that no longer meet the risk-return perceptions or the investment goals of the HNI.
Retirement planning is an essential part of financial planning for every individual. It becomes more pronounced for HNIs due to the complexities of tax planning, estate planning, legacy planning and philanthropical endeavours aimed by them and more. Therefore, HNIs often take the help of professional wealth managers who specialise in understanding and meeting the unique needs of HNIs by helping them in wealth building as well as protecting it.