Are you approaching retirement? Usually, people at the verge of retirement have mixed feelings about it. Sometimes, salaried persons feel scared about decrease of their regular incomes, or complete stop, if there is no pension. Some people feel that their hectic routines are finally coming to an end and they will be able to enjoy unending vacations once they retire. Some people feel that they have ticked off most responsibilities from their to-do list like purchasing a big house, a luxary car, sending the children abroad for education, or marrying them off. Now is the time to enjoy time the way they would want to. Some people feel worried about the approaching old age, and the various diseases that accompany those later years of life. Nevertheless, all these peoples with various attitudes to their retirements somewhat unanimously agree in one thing, that they have build up a large enough monetary corpus and there is no further need to worry too much about personal finance or keep a close eye on their investments. 

Indeed, when you have walked down a long way you should not worry too much about money. Money should not be the lone target or motivation behind all of your works. As you are approaching retirement, it is quite normal for you to start thinking about subtler and finer aspects of life, including spirituality, fine arts, literature, or just pure entertainment. Nevertheless, at the same time, you should not forget all about your investments and personal finance as well. After all, you have toiled hard all your life to build up your corpus; you must make sure that it would not go astray due to any sudden lack of interest or attention on your part. So, exactly how should you deal with personal finances, when you are 55 or 58 years old and the retirement is knocking at the door?

How should you plan your personal finances at 55?

Ideally, planning for retirement should have begun right when you had received your first salary. If you were among the rare ones who had invested their first pay cheque instead of spending it, congratulations. If you were like the majority to push off retirement planning at the greener years, there is no benefit to look back now and repent. Most financial planners will tell you that you should have start thinking about your retirement when you were 25 or 30. While that is true, that is purely empirical in most cases. In plain words, everyone knows it but few actually do. It is never too late to start planning for your retirement, and you can still have a great personal finance plan even at the age of 55. Let us see how.

Ten steps to plan your finance before retirement

1. Any financial planning begins with a precise knowledge about your income and expenditures. If you have not done that yet, start immediately. Calculate what is your take home salary, and what will you get as pension after you retire. Also, take a note of your expenses. It is a very good habit to note down even the minor day to day expenses (like Rs. 50 for laundry, Rs. 48 for 4 kg potatoes, Rs. 25 for biscuits and so on). Even if you fail to note the minute expenses, make a gross calculation. Other expenses will include insurance premiums, medical expenses, loan repayments if any and so on. This budgeting will give you an idea about how much you are saving each month. 
2. Make a chart of your net worth, including your house(s), car(s), property investments, bank deposits, mutual fund investments, stocks, investments in gold and so on.
3. Calculate where inflation is going to push your monthly expenses after 20 or 30 years. At present, the rate of inflation in India is an average of 5 to 7 per cent per year. With the life expectancy going up, I have seen even high-middleclass persons living very miserably 30 years after their retirement. This is because people often forget to take inflation into account, as well as the varying returns on their investments. If your PPF account is paying you 8.8% per annum now, there is no guarantee that it would not come down to 5% after 30 years. After retirement, you should plan well ahead so that you do not need to live from pension to pension, worrying dreadfully about every single expenditure that might incur.
4. With the advancement of medical sciences, the cost of medical treatments might greatly vary. They may go down, but they may go up either. The later years of life usually accompany a plethora of ailments. Plan ahead.
5. Captial erosion should be avoided at all cost after you are 55. If there is no urgent need for an aggressive investment that would eye higher returns, I would not recommend any equity investments at this age. The safety of your capital should be your foremost consideration. If you think that mutual fund investments may result in loss of capital, park your money in bank fixed deposits and Public Provident Fund. Debt mutual funds are still okay, and if you can afford to take a little risk, hybrid or balanced funds can be tried. Not beyond that. Equity investments whether directly in the stock market or indirectly through Exchanged Traded Funds and equity mutual funds are better to be avoided at this age. 
6. A successful personal finance strategy at the age of 55 is to fend off all mutual fund canvassers. They will swarm in numbers! While a mutual fund agent's job is to approach you and say nice words about the particular product he or she is promoting, you should first consider thoroughly whether you actually need to invest in that mutual fund or not. Learning to say NO ofen pays off. Often, I see people complaining about loss in mutual funds where they had invested only because a friend, or a reliable mutual fund agent, or a cousin, or a colleague's spouse advised them to invest in that.
7. If you still want to invest in equity after reading point number 5 and 6 above, you must be an experienced investor who thoroughly understands both the returns and pitfalls of equity investments. Yes, investing in equity is not bad if you know what you are doing. In fact, equity investments are the best hedges against inflation.
8. Rebalancing your portfolio is still very important. In general, at this age, you should invest 60 to 70% in debt and 30 to 20% in equity, depending on your risk taking capabilities. The remaining 10% should better go to gold or other commodities that can hedge the volatilities of equity markets.
9. Do not stop your medical insurance just because premiums are steadily going up. If unfortunately you fall critically ill, the expenses are going to burn a big hole in your pocket.
10. Let your family members know about all your investments. Make a diary and jot down all details like bank account numbers, bank deposit details, PPF account, insurances, mutual funds, bonds and so on. If you suddenly fall ill or even die, and your family members need to encash your investments, they should be able to do that easily.