Retirement planning is not an easy thing to do. Even the thought of it makes most of us go dizzy as retirement itself is a massive change in one’s lifestyle. Planning for retirement hence gets even more important so that when the actual time comes, we are all set to accept and live it to the fullest without any restrictions.
While setting your life and financial goals, retirement should be the topmost priority (at least in the long term). Plan your investments so that directly or indirectly you support your retirement. If you do not do so, you will be putting too much at stake; your life and probably of your spouse too. The case would be worst if you would have dependent children as well.
Planning the finances has been rated one of the toughest things and to top, the stress is retirement planning. Under the pressure to effectively manage things, people tend to make mistakes that are unforgiving in nature.
Here are some financial mistakes you must avoid while planning your retirement:
Setting and forgetting
The first and foremost mistake people make is forgetting the goals they had set with so much of enthusiasm. Persistency is the key to a secure financial future. No investment plan, no saving plan generates results in a day, it takes time to work upon your wealth to create wealth.
Once you have set your goals, stay in touch with them so that you can align your investments accordingly. This will also keep you updated about where your retirement needs are going and what else you need to do to take care of them.
Calculating on the past value
The next bid disaster people commit is to make calculations on the past value. Inflation is a big money eater and often mislead people into making wrong calculations as while estimating the retirement needs, people forget to factor in inflation.
Also, while making investments, do consider the fact that the past trend of the fund or fund house will not hold good for the years to come. You must have an understanding of the business and an idea regarding the company value before making an investment into it.
Apart from past performance, there are several other factors like trailing and rolling returns, company rapport, etc which make a huge difference.
Not benefitting from the tax benefits
People who do not take benefit of the tax benefits and deductions end up losing a lot of their money. Efficiently optimizing your taxes and making the right calculation regarding taxable and non-taxable income can prove to be a game-changer.
For example, section 80C alone allows you a tax benefit of up to Rs. 1.5 lacs which if you plan properly is a huge amount to be invested.
Also, if you earn an appreciable income and do not declare your non-taxable part, you will probably be taxed under the highest tax rate slab making you lose more money.
Not factoring-in the post-retirement expenses
Although retirement may seem like a lesser expensive phase of life, there are still some costs exclusively associated with it. For the starters, healthcare is one big concern once you enter your 60s. people who miss on to correctly anticipating their post-retirement expenses end up juggling on their budget. While your plan your retirement, have a clear idea of probable expenses which need to be taken care of.
Sticking to a conservative portfolio
The last mistake one can commit which is next to blunder is sticking to a single-track conservative portfolio. When you are young and have a monthly salary flowing in, equities are no big issue but once you have retired or are nearing retirement, you need to be more careful as to where your money is invested. You absolutely cannot afford to lose any of your money.
Hence, you must review your portfolio and diversify it as per your retirement needs. You must have a dividend plan for some of your investments to keep the cash flowing in and the remaining can be invested in a growth plan.
Retirement, if planned properly, is not a nightmare. There are lots of people in the world who when young work extremely hard, save a lot of money, invest it, grow it and retire early. Even if you do not plan on early retirement, you can always consider the above factors and make the most of your working years. Yes, retirement must be planned as soon a possible but it is never too late.