No more deadlines to meet, no more reporting to the boss, no more work pressure and joy of spending idyllic days- what more can you ask for? The blissful period of retirement gives you ample time to spend your days in the leisurely activities you had always wanted to indulge in.
To live this life of leisure that, you have always dreamt of, after your retirement, you need to be extra vigilant about your retirement planning. You need to understand that retirement also leads to a permanent pause to a regular salary credited to your account.
Hence, planning your retirement sensibly and investing in the best pension plans becomes more significant. You only retire once (in most of the cases)! And, you should be able to enjoy your golden years without any interfering cash-crunch.
Let’s go through the given list of 5 most common mistakes that people commit while their retirement-planning and how to avoid them:
1. Not Assessing Your Budget Correctly
Most of us don’t pay attention to the fact that just like our regular lifestyle, we would need a budget to maintain our retirement life, as well. We only focus on the picture of retirement we see in ads, i.e. days spent sitting on a rocking chair, enjoying the sunset view with your partner and never-ending holidays. However, retirement is more than that and so there’s more to its planning as well.
You need to focus on other aspects, too. What kind of lifestyle are you planning to live after retirement? Do you still want to go to movies every weekend, want to have dinners at lavish restaurants or buy properties? It will help you assess a more genuine budget of your life after retirement. As per financial experts, approximately 80% of an individual’s annual income is enough to cover her/his retirement budget.
2. Not Planning for Medical Expenses
With old age comes an array of medical conditions and ailments. Furthermore, it’s clear that the treatment cost for these conditions is quite high and can easily burn a hole in your pocket. Therefore, it becomes important to purchase a pension plan that focuses on health insurance which, will help you take care of these unexpected medical expenses in your old age. Your health insurance plan should have adequate features to cover you against acute & critical illnesses such as diabetes, Alzheimer’s and cancer.
3. Not accommodating your investment to suit different needs
It happens with almost every one of us that we tend to invest in a single investment tool and neglect the potential of gaining higher returns by investing in different investment plans at the same time. There is a wide range of pension plans such as mutual funds, whole life plans, fixed income plans and a blend of competitive as well as traditional investment products that offer a considerable capital gain and therefore help you have sufficient funds in your retirement kitty.
4. Underestimating your future costs
Might be, that an item in today’s scenario only costs you Rs. 50. But, is there any guarantee that it will cost the same even after 30 years, once you have retired? At an annual rate of 7% inflation, the price of the said item is going to be Rs. 381 after 30 years (around the time of your retirement). You also have to consider the impact of taxes on your savings as well as be prepared for the negative impact of economic turndown on your job.
To make your life simpler after retirement, make a list of all your responsibilities and liabilities that you would have to take care of after you retire. It can include anything and everything from – aging parents, helping spouses, moving costs if you are planning to relocate, dependent adult child (due to disability), etc. Being prepared in advance about these factors will help you plan your retirement budget more efficiently.
5. Start Saving Too late:
Financial experts suggest that ideally you should start saving for your retirement from your very first salary. However, most of us don’t pay heed to this advice and start our retirement savings as per our convenience. In most of the cases, people in their 20s consider retirement too far to even consider; in 30s they get entangled in the web of different loan payments and EMIs such as home loan, kids’ education and don’t have even time to think about savings; in 40s they are burdened with kids’ college education fees, medical expenses of their ailing parents; and, once they reach 50s the investment for their retirement becomes almost impossible.
In a Nutshell
It’s important to understand that time is the most valuable asset when it comes to your retirement planning. The more time you have for your retirement, the easier it will be to accomplish your financial goals. Procrastinating your retirement planning is almost like a wealth suicide and it can easily hamper your future lifestyle. Therefore, use your time smartly and start looking for different pension scheme, e.g. Public Provident fund (PPF), that can help you secure a tension-free retirement for you in your old age.
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