Five moves to avoid in retirement planning!

Retirement

“I am too young to start thinking about my sunset years”, “My wealth will gradually grow as there are many more years for it”, “My children will take care of me, as they love me”, “I would live a simple life in my old age”…..we have come across many people who have their own theories about retirement years and retirement planning.

While it is good to have your own outlook on your life, you may not be always right. There are some people who start to think about their retirement much late in their life as they are confronted with various other responsibilities. However there are some otherss, who fail to reach their retirement goals due to misconceptions. Sadly by the time their misconceptions are realised, it is sometimes too late to start investing for retirement.

Let us have a look at five most ill conceived notions on retirement planning today.

  1. “I can work post retirement”:  

Many people today are working post retirement and earning to stay independent without touching their corpus fund. But that doesn’t mean you can think working post retirement as strategy. While one may be energetic and a workaholic today, with advancing age the body and mind’s ability to put in and long working hours gradually declines. Also you cannot predict about your health conditions with advancing age. It is therefore not practical to give it a chance. Make sure to adopt a retirement planning module that allows income each month to live life as per your preferred lifestyle. With early starting and a good and balanced retirement planning, one can easily accumulate enough funds to live a peaceful, happy and content life in the sunset years without working.

    2. “Getting free from all liabilities is more important for me that retirement planning”:

A lot of people make the grave mistake to use their retirement funds to foreclose any loan obligations like home loans. They think that not having any loan on their head helps them to stay peaceful. But in fact, they are wrong. Retirement funds like a lump sum money received at the time of retirement including voluntary retirement funds and other retirement benefits must be used judiciously in such a way that they offer a monthly income to cater for the day to day needs of the individual and his immediate family in the retirement years.Loans will slowly find their way out.

   3. “This would be enough for me”:

Calculating future monthly expenses without factoring for inflation, is another grave mistake in retirement planning.Whatever that is worth Rs. 100 today may be worth more than Rs. 150 or more by the time one retires. All retirement money must be able to beat the constant inflationary highs. It is for this reason that investing only in a bank fixed deposit for retirement is a bad idea as one may eventually be losing money if interest rates offered by the bank are lower than the annual inflating rates.

   4. “I don’t care about pension schemes”:

There are some others who ignoring pension schemes like SCSS, thinking that life is uncertain. Yes, it is true that life is uncertain,but retirement plans are essential. One must make sure that the retirement corpus consists of balanced investment towards a number of financial instruments including the ones like senior citizen savings scheme or SCSS, Post Office Monthly Income Schemes and other such financial instruments. Other schemes to be considered to make a balanced retirement planning include bank fixed deposits, monthly income plans from various mutual funds as well as investing in various government bonds.

   5. “Let life go as it comes”:

Many people take it for granted and assume that their wealth will naturally accumulate and no additional planning is required.Some others are quite proactive when it comes to retirement planning but stop their planning once they are retired. Financial planning is always a work in progress and one must always keep planning for the future to avoid any financial crunch in the future.  If nothing works, financial instruments like a reserve mortgage loan for example is not bad to ensure a regular income till the person lives, making sure one is always financially independent and ready to face any situation in life.

 

 

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