Retirement is inevitable. And, to ensure that you live a financially independent life after retirement, you must plan your savings well. Read, on to know the common retirement planning mistakes that people make and how to avoid them.
You may be saving for several future important life events, and one of the critical events that is inevitable is retirement. To fulfil the necessities of life like owning a home, buying a car or investing for a specific life goal, you may need a specific plan that you may want to accomplish in a time bound manner.
Retirement planning also involves several factors such as the quantum of money invested, investment period, the assets selected for long-term wealth creation, etc. While you are planning for investment, it is easy to commit several rookie mistakes, which can have a serious impact on the retirement goal. So, to ensure that you don’t face any hindrance in your retirement plan, we list down a few common mistakes that people make and how you can avoid them.
Not saving for retirement at all
Many people tend to ignore their retirement planning until it is too late. They believe that employee benefits life provident fund, and insurance cover will be enough to help them get through the retirement stage. However, you must know these instruments often fall short to cover all your retirement needs, especially if you are nursing any debt like a home loan.
So, to avoid any unnecessary financial hassles in your post-retirement life, you must be proactive and start a retirement plan well in advance during your active working years. All you need to do is set aside a small portion of your income towards retirement and invest in a long-term plan like PPF or NPS to build a retirement corpus.
Saving without a plan
Saving with a definite retirement plan is as bad as not having a retirement plan at all. While planning for your retirement, you must earmark this important life event separately from your other goals. You can work with your financial advisor and craft a goal-based plan to help you live a comfortable life after retirement and maintain your current lifestyle in the future too.
Investing in debt-oriented instruments at a young age
When you are young, you may not have much financial responsibilities and so you may afford to take more risks with your investment. Hence, as a youngster, it is advisable to invest more in equity funds than debt-oriented funds because higher the risk, higher the returns potential in the long-run.
As you move ahead in your career and take on more responsibilities, you can easily switch from equity to debt funds near the retirement age. But, investing in debt funds alone from a young age would mean that your capital will not grow as fast and as much as you wanted to.
Investing without reading the fine print
It can be easy to get tempted to invest in instruments that assure quick returns and capital appreciation. However, you must know that such investments that seem too good to be true may be a scam. Hence, no matter what investment vehicle you choose, it is critical that you read the fine print of the scheme before putting in your hard-earned money.
If you are unsure about the scheme, you can seek advice from your planer and ask them to explain the details of the product such as expected returns, lock-in period, associated charges, etc and take an informed investment decision.
Digging into the retirement corpus
This is one of the most common mistakes that people commit that may put off their retirement planning. At times, you may face an emergency where you may need access to immediate cash and in such a situation it could be too tempting to dig into your investments and withdraw cash from your retirement corpus. However, such a move may derail your long-term retirement plan. You can use your savings to meet the expenses rather than touch the retirement corpus.