“You are a burden on your kids!”
Would you like to hear these words at the age of 65? We are sure you wouldn’t. Retirement is a life-altering event that changes the way you live, your spending habits, the way you think about finances, the way you think others value you, and so on.
Without a solid retirement plan that you start in your 30s or 40s, you being a burden on your kids will be the least of your troubles. So, to retire into a rich and independent second innings full of foreign travel and splurging on grandchildren, stop making the mistakes listed in this piece and do something today that your future self will thank you for.
Mistake No 1: Procrastinating Retirement Planning
Research suggests that retirement planning is never taken seriously, especially in India. Out of ten, only three people save regularly for their retirement in our country. The rest procrastinate, thinking that they have a lot of time left or they will start investing when their salary increases. This is the wrong attitude to have. Time runs quickly, and you will lose the benefits of saving early. Let’s see an example.
When 30-year-old Kishore invests Rs 3,000 in a retirement plan for 30 years, he receives a pay-out of Rs 44 lakhs. However, when 35-year-old Akshay invests Rs 3,000 in a retirement plan for 25 years, he receives a pay-out of only Rs 28 lakhs. This is a difference of Rs 16 lakhs because of starting merely 5 years later.
Fix it: Invest Now! Set your savings account to auto-debit money monthly for retirement plans.
Mistake No 2: Using Funds Meant for Retirement
One of the biggest mistakes of young or working Indians is that they start using their retirement funds like EPF, PPF, and FD for their emergency requirements or fulfilling their daily needs. Using up your retirement savings thinking you will fill it up later means digging your own grave during retirement.
Fix it: Do not touch your retirement funds until you cross 65 years of age, come what may!
Mistake No 3: Saving Without a Goal
Saving without a goal is a meaningless exercise because you are not focused that you need to save XYZ amount of money for ABC goal; therefore, you may end up building an inadequate corpus or use your savings to meet your mandatory expenses. One needs to understand that retirement planning is a goal-oriented exercise. Having an idea about how much you will spend every year in your retirement years will help you understand how much you need to invest and where you need to invest, keeping in mind factors like inflation, age, income, expenses, and financial dependencies on you.
Fix it: Understand your needs and have a goal. Choose a retirement plan that is tough to exit from.
Mistake No 4: Underestimating Growing Medical Expenses
“I am fit and fine; I do not need high health coverage.”
This is again a common misconception in Indians. To fulfil today’s needs, we are ready to compromise on our future needs. Even if you have good health, you cannot avoid age-related health risks. Health emergencies can wash away all your finances, especially in your old age. Despite this, many people fail to buy adequate health insurance cover, which will protect them from rising medical costs in the present and especially the future.
Fix it: Buy a health insurance plan with proper coverage keeping in mind growing medical costs.
Mistake No 5: Relying on Your Children to Fulfil Your Retirement Needs
Parents being dependent on their children is a common scenario in almost every Indian household. As the child starts earning, parents start relying on their income. This is a serious and common mistake made by many. By not planning for your retirement now, you will financially and emotionally burden your children in the future.
Fix it: Plan your retirement and live a financially independent life in your sunset years.
It’s never too late to make things right! Fix your retirement planning mistakes NOW.
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