Lockdown and its lessons for retirees

Although unprecedented, the COVID-19 pandemic lockdown was a blessing in disguise as it gave ample time to people to pursue their hobbies, take stock of their lives and homes, spend quality time with their family and follow a restricted lifestyle. The activities that an individual undertook during the lockdown are much the same that he will undertake during his retirement phase of life. However, retirement is not an extraordinary event or happening and an individual prepares for it throughout his life. The difference between lockdown and retirement is probably the duration; while lockdown is relatively for a short duration, the retirement phase is long and may extend into a couple of decades. Nevertheless, the stark reality lies in the uncertainty of its end. Every time the date to lift the lockdown approaches, people become apprehensive about its extension. Much the same way as a retired individual feels about the longevity of his life with each passing birthday. This lockdown will be the harbinger of societal changes and has already brought to the fore several socially and financially relevant lessons. Two of the greatest lessons learnt are to ‘stay by yourself’ and ‘maintain social distancing’. As for the elderly during their retirement phase, their children going away to earn their livelihood and raise their families, or even if they were together, their obvious indifference towards the elderly, forced them to stay by themselves and maintain social distance. The subsequent paragraphs highlight some of these social and financial lessons learnt during this pandemic crisis, which are equally relevant for a comfortable retired life.

Healthcare

the 18th Century Urdu poet Meer Taqi Meer’s phrase “Jaan Hai, to Jahan Hai” suddenly became the catchphrase on everybody’s lips. The most important financial lesson is to invest in healthcare and accord it topmost priority in one’s life. Staying safe, fit, and healthy is of utmost importance and one should learn to do it from within the confines of his house. First, one must eat a healthy and nutritious diet, and refrain from junk food. Second, you can look after your physical and mental health by following a healthy exercise regime through yoga, meditation, or aerobics at home. Health freaks may resort to purchasing fitness gadgets and home workout stations for their workouts. Third, purchase a healthcare insurance policy for yourself and your family members. Insurance companies provide senior citizen health insurance plans that offer medical coverage to senior citizens up to 75-year age. Most of these plans come with cashless hospitalization, cover pre-existing diseases, provide annual health check-ups, and waiver of pre-medical screening.

Emergency Fund

This pandemic disrupted household incomes of the salaried class, adversely impacted micro, small and medium enterprises (MSME) and in its biggest downside rendered millions jobless. In its latest report, Centre for Monitoring the Indian Economy has estimated India’s unemployment rate at 29.4 percent in rural areas and at 25 percent in urban areas. As per another report, around 8.2 lakh members of retirement fund body EPFO and private PF trusts have dipped into their savings and withdrew ₹ 3,243.17 crores to sustain in the lockdown imposed by the government. All this has proved the necessity for an individual to maintain an emergency fund to cater for unforeseen events or unexpected expenses. Ideally, this fund should cater for 4 to 6 months of expenses and the individual must invest it in a liquid asset like FD, or short-duration debt/liquid mutual fund. This crisis financially impacted the retired people adversely because the government reduced the interest rates of small savings schemes downwards by 70 to 140 basis points (100 basis points = 1 percentage point). Therefore, it is imperative for all senior citizens, including pensionable ones, to cater for an emergency fund that takes care of financial disruptions of their monthly income.

Work from Home (WFH)

sometime back the concept of the small office, home office (SOHO) was prevalent. Gradually the concept of co-working spaces started catching up where individuals or corporates hired fully furnished and equipped workstations/cabins/floors/buildings on lease to save the problems of managing its own commercial space. This also helped people of different companies and resources to network efficiently. After the Corona crisis, education societies and corporates are looking to evolve and streamline WFH culture. This will save employee cost and proliferate freelancing. Most retired people are comfortable with the idea of WFH due to the nature of their lifestyle. They may consider taking up online education and coaching classes, or online consultancy services to help them boost their existing income.

Self-Reliance

The singles most important lesson that this pandemic crisis has taught us is to be self-reliant. People at home or stranded away from their homes, during the lockdown, had to manage everything themselves. Servants and house cleaners were not available to perform household chores, only limited shopping of essentials done mostly online, bills also paid online mostly. Two very important aspects of self-reliance emerged that directly impact the retired fraternity, viz. household self-reliance, and digital self-reliance. Health permitting, they should be able to perform essential household chores themselves and must equip themselves for it accordingly. Household self-reliance implies that they must be capable of looking after their own personal needs and reduce dependency on other family members. This may entail change of routine, and eating/food habits. Post Corona period will see a proliferation in e-commerce and digitalization of various facilities and utilities. The elderly must stay abreast technologically, and become digitally self-reliant to perform all shopping, payment, and financial transactions online.

Simple and Frugal Living

People have realised during the lockdown that it is not difficult to survive frugally and one can spend life meaningfully and happily without splurging on discretionary expenses. Some major industries that have taken a hit during the lockdown are travel and tourism, hospitality, entertainment, and live sports. Most retired people believe in the concept of simple living and high thinking. This lockdown has reinforced their views and should prompt others who lead an extravagant lifestyle to cut their coat according to the cloth.

Gold

The market volatility and downside, falling interest rates and debt funds facing default and credit risks have once again turned the spotlight on gold as a safe investment and haven for the retired and senior citizens. Although currently, it is trading at its lifetime high, it may rise further in the coming year due to market volatility and currency pressure. It has always been a good hedge against equity. As an asset, senior citizens must invest maximum up to 10 per cent of their overall portfolio in gold to hedge the market volatility and help them tide over such turbulent times. The best paperless way to invest is either in gold mutual funds, gold ETFs or sovereign gold bonds.

Trust Deficit

in turbulent times, it is natural for human beings to develop a trust deficit towards others. During such times, investors tend to discard their financial advisor’s sane advice and trust their emotions more, which may prompt them to cognitively and emotionally biased investment decisions. This is more relevant for senior citizens, who inherently feel insecure due to their age and inability to perform a lot of tasks themselves. One must develop a bond with a well-meaning financial advisor in Jaipur to trust him during crisis situations, because ultimately, he also knows that if he advises you selfishly or incorrectly, then he may lose a good client forever.

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