9 Mistakes that you should avoid while planning your retirement
Retirement planning mistake is one of the most important things these days. There are numerous young individuals who have started planning for their retirement at the age of 60 while they still are in their 20’s. Unlike their parent’s retirement, government pensions are missing. Thus, many young adults have begun saving in various funds for life after retirement.
Planning in the air
Many people plan on early retirement such as when they are 50 years old or maybe even earlier. To achieve the goal of retiring early, one needs to start planning and investing so that sufficient funds can be gathered. For instance, one can save about 20 to 25 percent of their monthly salary and invest it in various funds in order to gain high returns.
Buying a lot of policies
Usually, many people claim to have bought 15 or even more insurance policies as a part of their
retirement plan. This method would certainly not help the retirement plan. One needs to understand the concept of the insurance policy. The insurance cover needs to be enough to take care of the financial expenses of the family unless someone starts earning for the family.
Not estimating life expectancy
One cannot take huge risks when it comes to the uncertainties of life. Generally, the goal of a basic retirement plan is to have saved a large amount of money. Life expectancy is an important factor that needs to be taken into account by every individual who's planning their respective retirements. If in the future, a situation arises where the saved corpus does not last long enough to support your financial needs, then what is the benefit of retirement planning. One can't even take a loan for the sole purpose of retirement.
Forget inflation
Inflation is a major factor and must be considered while planning retirement. While an investor often forgets to include the impact of inflation on the savings and investments, the capital amount starts depreciating. As a result, the corpus decreases and might get over while you'd be still alive without any income to support.
Start saving too late
Sometimes, an investor starts investing in various schemes and funds after marriage and kids. This results in less capital amount and even lesser return benefit. If say, an individual starts saving Rs. 5000 per month at the age of 20 and invest it where he receives 15 percent return for a period of 40 years, by the time he is 60, he'd have about Rs. 15 Crore rupees. However, if he implements the same plan but 20 years later, he would be able to gather only around Rs. 3.5 Crore. The delay in cost is about Rs. 12 Crore.
Wrong choice of investment for different needs
Each investor who is planning their retirement should have clarity as to where he is investing and what can be expected from the scheme. While some people invest in gold and real-estate for a short duration, they think that the assets will increase the money. An investor should have full knowledge of various investment schemes and the risks associated with them. Then he should choose as per their risk appetite and duration of the investment.
Insufficient health coverage
Medical expenses always increase as an individual grows old. The financial plan must have all the estimated health-related extra expense. Usually, insurance companies don't cover after a certain age, for example, 65 years or even 70 years old. The executive insurers would demand you to have a medical-checkup after the age of 45 and/or 55 years of age. It is crucial to get health coverage that would deal with medical expenses.
Redeeming social security fund or end of service benefit
An individual who has a provident fund account must not disturb the amount in it. You and your employer both began contributing when you started earning. The corpus amount can be increased when the power of compounding will do its magic. Such small savings shouldn't be underestimated.
Improper planning of income post-retirement
One needs to spend and invest the collected required corpus with intelligence. It should be kept in mind that post-retirement life relies on this corpus. You can distribute their investments into different schemes or mutual funds on the basis of the time period. It will also result in a low-risk factor. For example, one may keep the amount that will be consumed in either cash or equivalent. For the expenses of the next 3 to 10 years, it can be kept as bonds, Senior Citizens Savings Scheme or short term income plan. The amount that is left can be invested in equity or mutual funds.
PTIC is a financial planner and wealth management company. It is our job to assist the investors to make a beneficial retirement plan. This plan must be thorough and should cover all the important factors. It requires a team of expert professionals who are present at PTIC. We design a suitable plan that covers all the risk and provides the best possible gains for all periods of time. This will help you in the long run and would take the burden off your shoulders. The retirement planning is crucial and thus it must be done under the supervision of experts at PTIC.
