We all aspire to have a comfortable and relaxing retirement. To start your retirement, you may plan to spend a good part of your time in the Himalayas or escape to a holiday resort to spend quality time with friends and family. Whatever your plan is, retirement requires proper planning in your working years to fund your desired lifestyle. To achieve this, it is important to have your money parked in investment avenues that provide high returns and a regular income. However, due to ignorance and lack of guidance, we often end up committing mistakes that can spoil our retirement party. So here is a lowdown on some common retirement mistakes and how to avoid them.
Delaying Your Retirement Planning
Surveys on retirement planning trends in India have indicated that not everyone pays heed to this important but inevitable reality of life. A survey by a prominent international bank last year revealed that only 33% Indians save regularly for retirement. The rest delay it thinking they still have time to start the process or will start when their income rise. But this is not the right attitude as time may slip by quickly and you may lose the several advantages of planning early. The best time to begin your retirement planning is when you start working. If you have missed that bus, the next best time is now. Do not wait for increments or promotion or for an ideal moment to arrive. Create a plan now, and set your savings account to auto-debit money for investments every month. If time is by your side, you can take risk and choose equity mutual funds for investment. If you’re a conservative investor, go for NPS or PPF.
Borrowing From Your Retirement Fund
One of the biggest blunders young or working people make is liquidating their retirement fund for lifestyle and consumption. Borrowing from your retirement savings (such as EPF, PPF etc.) thinking you will replenish it later means slowing down your own progress significantly. Do not buy depreciating assets such as gadgets or automobiles or fund your consumption or travel with your retirement fund. Remember: retirement planning is a necessity for securing a dignified life when you bid goodbye to your working life. Consumption and lifestyle should be funded through your ordinary income. Investments made for goals such as retirement shouldn’t be diverted for less rewarding pursuits.
Saving Without A Goal
Retirement planning is a goal-oriented exercise. If you are saving and investing for retirement without any goal in mind, you are committing a mistake. Saving without a goal may result in unpleasant consequences like building up an inadequate corpus or depending on debts to meet your necessary expenses. So it is important you first assess your expenses and estimate how much money you will need once retirement sets in. Having an idea about your expenses in your golden years will help you identify the right investment options that can generate a healthy income for you in retirement and help you in preparing a handsome corpus. With the help of a financial expert, choose the investment instruments by factoring in your income, age and risk appetite. You can also take help from various digital platforms that guide you much savings you need to do as per your current annual income.
Not Bought Adequate Health Insurance Cover
Even if you have maintained a healthy lifestyle all through your life, you cannot avoid age-related health risks. Health emergencies can be a drain on your finances, especially in your golden years. Despite this, many people fail to buy health insurance policy to protect themselves from rising medical costs. The group insurance cover provided by your employer is only available till you are working, so do not commit the mistake of relying only on that. If you have bought health insurance plan for yourself, make sure it is adequate and keep periodically topping it up to enhance your coverage with the passage of time.
Depending On Your Kids
In India, it is not uncommon to see parents depend on their children after they start working. It is a common mistake many make. In depending on children, they abnegate their financial independence. By not planning their retirement they also financially and emotionally burden their children. Therefore, plan your own finances and retire peacefully on your own terms.
The writer is CEO, BankBazaar.com