Retirement
brings an end to your economic independence. You stop earning and your life
gets dependent on what you have saved throughout your employment years. A
little mistake in your retirement planning may result in an irreparable
financial damage in your life.
In this
article, we will show you the 6 most common blunders that people make while
planning their retirement.
Read on to prevent yourself from committing the same mistakes in your life.
Not Planning Your Post-retirement Lifestyle
Lifestyle
planning should be considered an integral part of retirement planning. You must
have a clear picture in your mind about the kind of life you are willing to
have after retirement as this will help you set your financial goal for
retirement. If you want a laid-back life with your family and grandchildren
around, the required size of your retirement corpus will be different from that
if you had preferred a life full of tours and travels. Your post-retirement accommodation
will also make differences in your retirement planning. So, the first step is
to plan a preferred post-retirement lifestyle and then, take help
of a pension calculator to estimate the amount you need to have in your
retirement corpus.
Starting Too Late and Saving Too Little
It is
necessary to start saving for retirement as early as possible. Having an
employee’s Provident Fund ensures that your retirement planning is already in
progress. But you too should take an active part in your retirement planning.
Start your own planning separately by investing in different saving
schemes. Investment plans are another
great option to multiply your wealth. Moreover, start investing as early
possible. If you start late, you will have to save in larger amounts. Starting
late and saving little is a dangerous combination that can end up your
post-retirement life in a financial disaster.
Not Taking Economic Ups and Downs into Account
Economic ups
and downs are the parts and parcels of life. Retirement, therefore, should be planned
in such a way that it beats inflation and help you stay financially independent
throughout your life. Pension calculator
will estimate the amount you need to have, by the time you retire. The results
of pension calculator are mostly accurate as it takes inflation into account. Taking
the current inflation rate into account is very important as economic
fluctuations are largely dependent on it. Hence, Plan for your retirement strategically
so that it sustains all the economic ups and downs of your post-employment life.
Not having sufficient health
insurance coverage
Our health tends
to deteriorate with age. Therefore, if you do not want to spend a major part of
your retirement savings on medical expenses, you should get yourself sufficient
health coverage. Health insurance plans promise to provide financial support in
times of medical emergencies. So, if you think a life insurance plan with
critical illness rider or hospital cash rider will be enough, you are wrong.
Getting your health insured is the wisest way to fight medical contingencies post
retirement.
Not having a diversified investment portfolio
If you think
Fixed Deposits are the only investment instrument to grow wealth, you are
wrong. They offer lesser interest rates that those offered by other investment
plans like ULIPs or equity funds. ULIPs
give better returns than bank FDs and NSCs. So, put your money into various
investment instruments. Moreover, while investing, make sure to have a
diversified financial portfolio, as it will give you higher returns at lower
risks.
Not Taking Retirement Plans
Seriously
A large
fraction of people in India does not take pension plans seriously. As per them,
retirement plans offered by insurance companies do not offer as much return as
that offered by other investment instruments like Equity Linked Saving Schemes,
National Pension Scheme or Senior citizen Scheme. But these schemes do not provide
life coverage which is sufficiently offered by pension
plans. Moreover, if you are not averse
to investment associated risk, you can invest in a unit linked retirement plan
or a pension plan offered by mutual fund as well.
To Sum Up,
Plan your
retirement strategically. Do not make the blunders mentioned above, if you want
a nourishing and flourishing life post retirement.
