We all have certain dreams and aspirations in life. We want to own a nice house, we want to send our kids to the best schools and colleges, we want to have six pack abs, we want to see the grandeur of our daughter's wedding. And the bulls eye, to have a Happy Ending; a worry free, healthy & peaceful Retirement. For many people, these goals are always on their mind. Their goals are properly documented in terms of the future cost of the goal, the exact number of years from now when the goal would arrive, etc. They are constantly preparing for these goals by saving and investing regularly. Then there is another set of people who believe that goals are the biggest source of tension in a person's life, they bring in nothing but stress, this set of people live in the present and want to handle things as they come. They too have some dreams hovering in their mind but they just don't want to prepare and want to live worry free.

So, which set do you belong to?

If you belong to the latter set, then do you need to give a second thought?

Probably Yes. Your goals don't pluck away your happiness, rather they continually restore your good night's sleep. Let's see how:

Our goals keep us going, they motivate us to plan and work for them. An athlete running a 500 m race will be fueled for the event, will showcase a round of exemplary dedication and perseverance, because he/she can see the target, the finish line which is 500 m ahead. If there is no goal, no finish line, the adrenaline rush in the athlete will be missing, the spirit to make it first would not be there. Similarly, our goals serve as a purpose for us to be passionate about and to sweat for. The goal, be it financial, buying a house in the next 5 years and stretching your limits to save and invest for your house, or otherwise, going for a trek to the Himalayas and preparing your body for it, you need to “have” a goal to work for it.

Goals give us a direction in Life, There are students who are about to complete their masters and still don't know what do they want to do in life, they are likely the ones who will eventually be hopping from one job to another until their 30s or even 40s struggling to find the perfect fit. The one who has a clear head from the very beginning, who knows what exactly he wants to do in life, will know what to focus his time and energy on, from an early stage.

Our goals keep a check on our spendings, This happens primarily because of the investment commitment for the goal. A slice of your income goes towards your goals, you are left with lesser disposable income, so automatically your discretionary expenses come down.

Also your goals do not let you take impulsive decisions, by nudging at your elbows whenever you are about to spend on something which you should avoid. When you are about to spend on a fancy gadget like an iPhone X, your goal of the dream home comes flying in, stares into your eyes and asks, “What are you doing? What about me? You shouldn't be spending like this” And suddenly you realize that your priority at this point in time is buying the house, so you change your mind, buy a One Plus 6 instead, and direct the surplus money towards your future home. This happens because our goals help us prioritize.

Planning for goals help avoid the last minute stress,Whether you foresee and plan for them or ignore them altogether, your goals will arrive. Your kids will grow up, you have to provide for their education and wedding, you will grow old, you will need money to survive in your old age. It will be a smooth ride for the one who visualized and prepared for these goals, and for the who was living in the present, these goals are likely to give him a tough time, he will have to sweat for arranging huge sums of money in a short period of time, and at the end he may or may be able to fulfill the goals in the way he wanted to.

To conclude, our goals don't really give us stress, they give us the motivation to live. They give us a way of life. And everyone has dreams, there is a need to identify, define them as clear goals and plan for them. So stay focused, go after your dreams and keep moving towards your goals!

Retirement period is considered to be a new beginning for an individual. It is the time to unwind and pursue hobbies which you were not able to pursue due to lack of time during your working life.
Your post retirement period can be the most relaxing period of life after long working years, but also on the other hand, it will be a period when fresh income will stop and you will have to manage with whatever retirement corpus and/or pension you receive. With higher life expectancy, increasing cost of medical treatment and double digit inflation, life looks more challenging for a retired individual.

With urban Indian, the biggest challenge of retirement life is perhaps increasing life expectancy with advancement of medical treatment but coupled with rising medical costs and with private employment & lesser possibility of employer sponsored pension, we all may need to fund around 25 years of retired life from our own savings if we consider retirement age at 60 and life expectancy of around 85.

Interest earnings from debt / small savings have been the traditional source of income for retired individuals. Looking at the bigger picture, we find that typically, interest rates are high in underdeveloped and developing economies but in developed economies, they are relatively very low. Prudent economics encourage the government to bring interest rates down or aligned with market rates for government sponsored saving schemes like PPF, Postal Schemes etc. We have already seen a declining trend over the past decade in such products. With falling interest rate scenario, only debt retirement portfolio will not generate return sufficient to meet rising expenses during retirement period of 20-25 years. This leaves very little option for a retired individual to look for in terms of investment instruments which can generate inflation beating return.

Inflation: The crux of the problem
During working life, the inflation effect more or less get nullified as your income grows faster or in line with inflation rate but during retirement, inflation eats into your savings as you stop generating additional income. With stagnant and/or slow moving pension, inflation greatly increases the gap between expenses and cash inflow during retirement. This becomes very critical when we consider extended periods of retirement of over 20-25 years. So it becomes imperative that your portfolio fulfills either of the 2 conditions in face of rising expenses and falling interest rates:

• Your retirement corpus or any post retirement portfolio be of such huge size that all future expenses can be managed by earnings and withdrawals.
• Your planning focuses on both current earnings and also future growth of portfolio. Here you would need to generate inflation beating returns.

The Bucket Idea:
We can represent the entire portfolio planning exercise in a simplistic bucket concept. The simple rules of this idea are...

• Each bucket represents a different need/objective and aims to fulfill the same and one should evaluate it according to its objective
• One should not compare returns from each bucket in the same time frame as buckets would be for different time frames
• The buckets must consider your entire portfolio in all asset classes. Remember to plan your buckets with your financial adviser with proper disclosures.

Just to briefly state at the beginning, there are different baskets and you must choose baskets as per your own objectives and needs. To begin with, let us ignore the size of the basket as it would be explained later.

• Bucket 1: For emergency funds / short-term expenses /planned medical expenses
• Bucket 2: For generating earnings/income for meeting expenses – either by pure earnings or with capital withdrawals as option in rare cases
• Bucket 3: For ensuring portfolio growth and ensuring total 'value' of portfolio is kept intact even after inflation
• Bucket 4: For generating good wealth in long to very long term

Now we begin choosing the buckets, one at a time. Remember, that estimating the need and size of the bucket will eventually be the outcome of a thorough financial /portfolio planning with your adviser...

Bucket 1:
This is essentially your emergency fund for meeting any medical emergency or for upcoming /planned medical treatments, etc. The emergency fund should also cover your upcoming expenses for few months, say 3 at least, at all times. The emergency fund can be kept in bank or in cash though it is recommended that you keep only limited amount in cash if access to bank / ATM is convenient.

Bucket 2:
This bucket essentially is for generating returns /cash inflow for meeting your expenses. The objective here is to have regular flow of income ensured through interest earnings for the next 3-5 years at the upper end without facing any return/income fluctuations. This bucket is most important and must remain with you always such that projected cash inflow is always assured first.

Over the time, this bucket will lose value due to inflation and withdrawals, if any planned. With rising expenses, this bucket may need replenishment from time to time. Capital withdrawals should be avoided as far as possible especially if you are in the beginning years of retirement. Meeting expenses by withdrawals is recommended only when you are in later years of retirement / very old age as it comes at the cost of sacrificing future earnings.

On the other hand, in cases where there is good retirement kitty available, there can be a surplus cash generated over expenses. It is highly recommended to make proper use of this surplus and put it preferably in bucket 3 or 2, as may be required. Money can be withdrawn manually and with mutual funds, you can opt for Systematic Withdrawal Plans or SWPs with set frequency and amount.

Typically, fixed/regular interest paying debt instruments can be a part of this portfolio. It will predominantly be a debt portfolio and may comprise of PPF, Bank FD, NCD, Post Office Senior Citizen Savings Schemes, etc. In most cases, the size of this bucket would be the largest. Debt mutual funds are a very good match for bucket 2 as they offer great choice, comfort, features, liquidity, convenience and taxation advantages without any additional risks. There are products to match any investment horizon and one can choose from a wide variety of products to build a smart portfolio in debt mutual funds.

Bucket 3:
This bucket is for replenishing and/or generating additional value to your portfolio. The idea is to not let your total portfolio value decrease but grow especially in the beginning to middle years of your retirement period. You must gain more in long term in bucket 3 from what you lose on bucket 1 or 2 in terms of 'real value' after accounting for inflation. The size of this bucket would perhaps be the largest at beginning of retirement when you should plan for 20+ years of retirement ahead of you and start decreasing when you approach old age.

Typically balance funds or preferably diversified equity mutual funds can easily be put into this bucket. You can also add some component of gold here. With a horizon of 5+ years horizon at the minimum, this bucket should ideally create inflation beating returns.

Putting regular surplus savings, if any, into bucket 3 is a very good option as wealth can be generated without any big portfolio risk or volatility. Doing a mutual fund equity SIP from any surplus earnings from bucket 2 can be a very smart idea. One can also plan for Systematic Transfer Plan or STP from bucket 2 to bucket 3 using mutual fund products in both. An STP has similar advantages as SIP with difference that it is from an MF fund to an MF fund while in SIP it is cash being invested.

Equity is something that has the potential to deliver superior returns to inflation but only in long run. Exposure should be taken after your needs are safe bucket 1 and 2. Further, one must not lose sleep by seeing volatility in bucket 3 and if you are the one to loose sleep/ grow impatient due to market fluctuations, perhaps it would be wise to instead opt for peace and avoid investing in bucket 3.

As the idea is to also replenish bucket 2 by using bucket 3, one can shift money at regular intervals with adequate surplus value being realized. This can be an outcome of what the financial advisers often term as 'portfolio rebalancing'. The quantum of withdrawal should be limited to matching the real value of bucket 2 and that which is essential to fulfill the objective of bucket 2.

Bucket 4:
Having the bucket 4 is purely optional. This is a purely aggressive asset class portfolio with clear objective of capital growth in long to very long term, say 8+ years at minimum. This bucket makes sense to be chosen only at the beginning years of the retirement and it is something that the retiree feels free to forget and not use any time soon. We are planning for a long retirement so having this basket does carry some sense.

Diversified equity mutual funds, mid-cap / small-cap equity funds, etc. can be kept in this bucket. One can again have the option of investing small lump-sum at retirement and/or preferably start an SIP or an STP from bucket 2. At regular intervals after say 5-6 years, one can start shifting money /appreciation from this bucket to your bucket 2. The size of the bucket would obviously be small and smaller than bucket 2 and 3. Further, this bucket is not recommended in old age.

Total Retirement Portfolio:
One can have any desired combination of buckets but the popular options can be as given below. The actual size and quantum of money can be determined only after proper financial planning / asset allocation exercise.

• Bucket 1 and 2: An extra safe option but comes at sacrifice of real value of portfolio. In future, earnings from portfolio may not be adequate to meet rising expenses. Recommended when you have a very comfortable retirement kitty or other source of income /support
• Bucket 1, 2 and 3: A balanced portfolio that has some scope for preservation / growth of assets to compensate fall in real value. Generally recommended for all who do not have a very comfortable retirement kitty and have to rely on portfolio for meeting needs even in older age
• Bucket 1, 2, 3 & 4: An aggressive portfolio. Recommended only if you do not have any sufficient retirement kitty and need to have good portfolio growth in long term to meet expenses in older age. Growth must never be opted at the cost of earnings safety in foreseeable future.

	Bucket 1 : 5-20% exposure Products: Cash / Bank Balance / Liquid mutual funds Horizon: Immediate / very short-term / short-term
	Bucket 2: 20-60% exposure Products: Debt mutual funds / Bank F.D. / small savings schemes Horizon: short to medium term (<5 years)
	Bucket 3: 10-40% exposure Products: Balance funds, diversified equity funds, Gold Horizon: long (5-10 years)
	Bucket 4: 0-20% exposure Products: Aggressive equity mutual funds / direct equity Horizon: long to very term (>8 years)

Buckets & funds summary

• Retirement kitty can be well invested in buckets 1, 2 & 3.
• Regular expenses / medical costs, etc. can be met from Bucket 1 & Bucket 2
• Filling Bucket 3 from Bucket 2: Investing any surplus earnings, SIP or by STP
• Replenishing Bucket 2 from Bucket 3/ 4: By STP / Switch / shift at regular intervals over time

The Asset Allocation:
A popular perception is that post retirement, we must keep all assets safely into debt. Though this is actually a sound theory, it does lack in addressing the bigger problems it might generate in long term. The idea must always be to do a thorough financial planning exercise to estimate the real needs and then define a proper portfolio with sound asset allocation into multiple asset classes like equity, debt, cash and physical assets during retirement years. The equity component has strong applications and can be effectively used to make your retirement planning more long term sustainable and rewarding.

Typically, the asset allocation would be skewed towards debt. The physical assets like gold would be optional for diversification and inflation hedge in medium to long term. The equity part would be for meeting growth objective over a long term since the expected post retirement period can extend 20-25-30+ years. The long term returns potential of equity has often been talked about here and the SIP route definitely adds extra safety and comfort into the asset. Thus, when it comes to portfolio planning post retirement, one must at least consider multiple asset classes and take exposure with proper planning as per the need.

Going beyond portfolio & buckets !!

• If you have not yet retired, try to get yourself health / medical insurance as soon as possible
• It is recommended that you keep all valuables /jewelery safe / in custody especially if staying alone. Take extra care of your physical security.
• One can enjoy retired life only if he/she is healthy and fit. Maintaining a good lifestyle with diet/yoga/walks/exercises can keep you fit and healthy and also keep those frequent medical bills away.
• One can look for extra income by way of paying guests / rent of property
• Reverse mortgage can be looked at in absence of any financial support/income if you do not wish or need to give ownership of property to any dependents after you in inheritance

Summary:
Every individual who is retired or is approaching retirement, would seek a steady income flow post retirement to meet expenses. With expected long retirement years, it becomes a challenge and hence the traditional way of thinking has to be changed and an active portfolio management with focus on both safety and future needs has to be considered. There is now less risk that can be taken compared to the accumulation phase to provide a greater sense of certainty that assets will continue to support a comfortable retirement. However, at the same time, there has to be some capital preservation and growth over the time, to ensure that income streams keep pace with the rising cost of living. Such objectives can be conflicting, with higher levels and a trade-off between returns and risk has to be made. The Bucket concept is nothing but a simplistic representation of building a smart portfolio post retirement.

After years of working hard we should all not shy away from retirement but accept it as a fact of life and the dawn of the golden years of your life with immense possibilities. One can seek many pursuits in life and be more socially, politically or spiritually active in life. In this phase of life, money carries less significance in life but even then it forms a critical aspect as one has to meet the basic needs and be self reliant in leading a dignified life. Irrespective of what age one is, retirement planning is very critical and the early you begin, the more comfortable and peaceful your retired life can be. We wish and sincerely hope that every one of us enjoys a healthy and peaceful retirement.

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Leonardo da Vinci once said that “simplicity is the ultimate sophistication.” This quote still stands very true for everyone today and for everything, be it mind or heart, relationships, home, work or money. One of the best ways to achieve simplicity is to declutter. In this article, we will attempt to make a case for decluttering and how to do it.

Why declutter matters?

There are obvious benefits for decluttering are many. We live in a world of many. Today getting anything is very easy, just a click away. There are many distractions, updates, communications, events happening at virtually every second. The world today is smaller and we find a lot of things happening around us. Often we find our head spinning with so many choices around us. Here are the obvious benefits we will enjoy once we walk on the path to decluttering.

• Saves time: by removing time we spend on unnecessary things

• Make better choices: making by removing unnecessary things /details

• Helps prioritise: from among many things

• Bring focus: on things which are really needed

• Aids memory: by reducing the things we need to remember

• Being consistent: by simplifying things

• Get peace: by removing complexities

How to declutter and achieve simplicity?

Simplicity is something that many of us desire but many do not know how to do so. Here are the important steps to do so.

• Target: The first step is to decide what to declutter? Since almost everything around us may be decluttered, deciding where to start is an important step. Chose an area or subject which you feel requires urgent attention and has been draining you out mentally or physically. This could be your finances, relationships or even your kitchen or wardrobe.

• Learn: The second step is to learn how clutter and lack of simplicity are impacting your time, productivity, money, etc in your chosen area. Have a closer look at everything going in there. In case you are looking at your finances, just observe how many financial transactions, holdings, investments, accounts, advisors and such other complexities are there. Are they too many? Understand what and how you have been at a disadvantage due to this.

• Prioritise: The next step is to prioritise. What is the most important? What is the one thing you can and cannot live without? Organising into important and not important is an important step and you really would need to be strict here. Keep doing this till the time you feel you have a shortlist of the most important things that matter.

• Reduce: Once you have prioritised, the most critical action now is to remove the things you do not need or do not really carry any real value for you. In finances, one could do this by consolidating your investments, closing unused accounts, closing policies that do not serve the real purpose of protection, moving portfolio with only one advisor, reducing debt, and so on. One has to be very ruthless here to remove things that do not matter.

• Add: It would be rare that you would need anything to be added to your chosen target area of decluttering. However, it is possible and perhaps even a good time to add the most important things which you have been missing out since long. In finance, a comprehensive financial plan could be the one thing you are likely to be missing out.

In short, here is what we have done – subtract the obvious and add the meaningful. That is what declutter and simplicity is really about. Remember that you have succeeded in life when all you really want is only what you really need.

Simplicity in finance:

• Simple expectations: The major reason for mistakes, frequent churning and bad product choices is often exaggerated expectations. We need to have sound, grounded and long-term reasonable expectations and hold on to same at all times.

• Declutter portfolio: Most of us would likely have many insurance policies, bank FDs, small saving schemes and even mutual funds and equities. Time to have a strategy and remove the products that do not add real value.

• Prioritise your goals: One needs to prioritise one's goals. Often the random, small goals are given priority at the cost and compromise of long term big goals. This has to stop

• Have steady plans: Frequent changing of your plans has many costs attached to it. Have a comprehensive financial plan and stick to it.

• Have discipline: Disciplined savings over the long term is the ideal and easiest way to create wealth. Start a SIP, keep growing your SIP and forget about it.

• Reduce expenses: If you look around, there are many unnecessary expenses around you. This is impacting your financial well-being, one expense at a time.

• Do not run after ideas: Do not chase ideas or stock tips or get rich quick schemes. It does nothing but adds uncertainty and complexity to your finances

• Do not make too many mistakes: Not making too many mistakes or big mistakes in life is the surest way of letting your money grow and not protecting you from financial shocks.

Socrates once said, “the secret of happiness, you see, is not found in seeking more, but in developing the capacity to enjoy less.” If we all live to this principle in our lives, I am sure that our lives will be much happier, peaceful, rewarding and healthy. Let us commit ourselves to simplicity in all aspects of our lives and declutter thing which weighs us down, physically, mentally, emotionally and financially.