The percentage of people who take retirement planning seriously is far less than the people who have not even defined their goals yet. At the same time, some people plan their retirement but often end up making some cardinal mistakes, which costs them dearly as they near their retirement.
Let’s look at the top five mistakes to avoid when making your retirement plans.
- Not Starting Early: Youngsters often put off their retirement planning, thinking it’s not the right age and they have enough time before they can even think of retirement. This is not the right approach at all. A retirement corpus could run into crores depending on your lifestyle and other factors. Accumulating that big a corpus can only happen when you start early. Moreover, the power of compounding plays a major role in helping you accumulate the corpus, which needs time. Thus, start early, start small to end big.
- Not Preparing for Emergencies: Emergencies can put you off track from reaching your retirement goals. Many don’t invest in a good protection plan such as health insurance or building an emergency fund, assuming they are invincible or not giving it a serious thought. However, with rising medical costs or job losses, you might need to dig into your savings which can derail you from building your retirement corpus. Invest in a health insurance plan or build an emergency fund to ensure temporary obstacles don’t stop you from achieving your goals.
- Not Factoring Inflation: Inflation is your biggest enemy when building a retirement plan. But many make the mistake of not thinking about the effect of inflation on their savings. The value of Rs 100 will be far less in 15-30 years from now. Make sure you add inflation to the retirement fund you think you need right now to build a corpus that can help you sail through the retirement years with ease.
- Not Increasing Your Corpus with the Increase in Your Income: While you may have accounted for inflation, did you account for changes in your financial needs due to your lifestyle improvement? Again, this is a big mistake that can cause you to build a corpus that is far less than your needs when you retire. Thus, with every increase in your income or salary, redefine your retirement goals as well.
- Not Investing in a Plan: Retirement planning is not just about building a corpus. It needs to be more detailed, such as, cater to your monthly expenses apart from protecting your family in the form of life insurance. Make sure you calculate and estimate your monthly expenses needs before choosing a pension retirement plan. Do know that the expenses might rise slightly once you retire due to inflation, as well as medical and healthcare costs. Choose a suitable plan and start investing today.
Retirement years doesn’t have to be about making compromises. In fact, if you prepare for the last innings of your life now, you can have the best time ahead. Retire from work but not from life by saving and investing in an appropriate plan now.