This is a saying by the father of our nation, Mahatma Gandhi “Freedom is not worth having if it does not include the freedom to make mistakes.” You are human and making mistakes is in your blood. You are 60 and from the day you first started working, you have saved nothing for retirement. Live today…forget tomorrow… has always been your motto. Not surprisingly you are completely broke after retirement. Sure you have committed a mistake, but how are you going to come out of this mess? There is no such problem which does not have a solution. Yes…there are ways to survive and perhaps enjoy retirement, even if you are completely broke after retirement.
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Surveys have shown that around 47% of our citizens do not save for retirement. Not surprisingly, many of our citizens will be completely broke after retirement. Are you one of these citizens? There’s no need to worry. This is definitely not the end of the road for you. Let’s listen to an interesting story where Manish was able to survive and also enjoy retirement, even though he was completely broke after retirement.
Manish is 62 years and lives in the Mumbai Suburbs. Manish retired a couple of years ago. Manish worked for 30 years as a supervisor in a garment factory. He changed jobs regularly and earned a decent salary as long as he worked. Manish got married at 34 and was blessed with a son, Suresh, a couple of years later. Manish enjoyed life and never bothered saving for retirement….Manish says “I will worry about retirement when it comes”. Manish did a couple of things right….He availed a home loan when he was 35 and bought a 2 BHK apartment in the Mumbai Suburbs. He closed the home loan in his 50’s. He also made sure that he had money to fund Suresh’s education. Suresh was a bright student and completed his computer engineering, just a couple of years before Manish retired. He got placed almost immediately in a reputed MNC and was offered a good salary.
Now at 62, Manish was completely broke. He could have asked his son Suresh for money, but decided against it. This is when his friend Surendra, gave him a brilliant idea. He suggested that Manish could sell his apartment and relocate to the outskirts of the city. An apartment on the outskirts of the city is quite cheap, compared to the suburbs. Manish could easily live off the money he got by selling his apartment. Manish sold his apartment for a crore and bought a 2 BHK apartment for INR 40 lakhs on the outskirts of the city. He still had INR 60 Lakhs which he could live on even after retirement. Now Manish had the money to enjoy a comfortable retirement.
In reality we have to consider tax implications of selling an apartment and buying a new apartment, which means Manish actually got a lesser amount than INR 60 Lakhs. Let's table this discussion for a later time.
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Manish sold his 2 BHK apartment in the suburbs of Mumbai and bought another apartment on the outskirts of the city. The apartment on the outskirts being cheaper, Manish was able to live comfortably on the money he got by selling his apartment. But was this the only way, Manish could fund a comfortable retirement? Could he not have availed reverse mortgage? So what is reverse mortgage?
Reverse mortgage is the exact opposite of a home loan. In a home loan you borrow money from the bank, to buy your apartment. You then repay this home loan in monthly installments called EMI’s (Equated monthly installments), within a fixed time period called tenure of the home loan. In reverse mortgage you pledge your home with the bank. The bank then gives you money, either as a lump sum or in monthly, quarterly or annual installments. This is just like drawing a salary.
You need to be 60 years or above, to avail reverse mortgage. The title of your property needs to be clear and marketable, with no mortgages against it. Manish was 62 years and his apartment was free of mortgage, as he had closed off his home loan. Manish could have pledged his apartment and got 60% to 80% of its value in reverse mortgage, depending on the bank where he availed this facility. He could have lived on this money for many years. There’s more good news….The money Manish receives from the bank in reverse mortgage payments, is not taxed. The bank gives Manish money every month, for a time period of 10 years or even 20 years (tenure of reverse mortgage), depending on from which bank he avails the facility. And yes….Manish and his spouse can live in the apartment for as long as they are alive.
There are certain conditions Manish needs to meet to avail reverse mortgage
You must be wondering who repays the money borrowed from the bank? After the demise of Manish and his spouse, their son Suresh repays the borrowed amount with interest to the bank. The bank then removes the pledge on the apartment.
Manish could have sold his wife’s gold and both of them could have lived comfortably after his retirement. I’m sure his wife would not be too pleased with this plan.
So what have you learned from this article? Even if you have not bothered to save any money and are completely broke at retirement, there is a way of escape. You may be forced to take some drastic measures, but there is always a way out. Life does give you second chances. These tips may be the last resort to save you, even if you are broke after retirement.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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