One big worry, I have heard from many retirees are the surprise cashflow needs life throws at them (and they dont have a salary). The conversation made sense to me – I dont have my regular cashflow in terms of salary, but I can get the same surprise needs for which I never planned for in the first place. If I touch the retirement corpus, for such surprise needs, then that can lead to even bigger issues in the future. So how can I solve this? “Surprise Cashflow laddering” – is the answer.
So what is this “surprise cashflow laddering”? Each year into the future after your retirement, you plan to create a cashflow which can help you actually tide these “surprise needs”. If I plan for these cashflows, why is it a surprise? Well; its a surprise, because you won’t put this under your retirement kitty fund at all (and definitely won’t use it if there are no surprise needs that year). You plan for it separately from your retirement. Your retirement kitty takes care of your regular needs, your “surprise cashflow ladders” takes care of your “surprise needs”.
Let me give you an example – I want a surprise cashflow in 2031. Its 2023 today, I can use SGB (sovereign gold bond) for getting this surprise cashflow in 2031, because the SGB matures in 8-9 years! Similarly I want to have a surprise cashflow in 2032 – I can use a SDL (State Development Loan) Bond which matures in 2032 for the same purpose.
So why am I not using any asset to create these surprise cashflows? Well, there is not a big logic for this, but personally because I wanted to diversify and invest in securities which are not really part of my regular retirement portfolio.
In short what are the advantages of doing this surprise cashflow laddering?
Safety net built to comfort you
Perfect safety net when you dont have a salary for you after retirement.
You know exactly when and how much you will get
The biggest advantage I see is it fits the purpose I have for surprise cashflows. These instruments, mature in a year and they mature only then. So I know for sure, I have something for the surprise needs for that year.
You cannot touch them till that day, they mature when they mature 🙂
So I cant touch till they mature.
So what is the ideal scenario? And when will I stop creating these surprise cashflow layers? Well, there is no right answer to this. This is a risk mitigation strategy and depends entirely on the comfort level of each one of us. Personally, I am initially starting off and trying to create a 1L surprise cashflow per year 20 years after my retirement. Once this is done (if I manage to do it), I will try to increase this buffer further and try to make it 1.5L per year and so on till I am comfortable. Please note again, this “surprise cashflows” is not part of the regular retirement planning. I would do this only after my regular retirement needs and goals are met.
I generally use RD, Bonds, SGBs, any benefits which have a fixed maturity period for creating these “surprise cashflows”.
So what would you do with that surprise cashflow, if there were no surprise needs that year. Use it to treat yourself or your better half, silly! 🙂
