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Retirement planning has now become one of the most crucial financial objectives among working professionals in India. Here are 4 common retirement planning mistakes that one should avoid.
Retirement planning has now become one of the most crucial financial objectives among working professionals in India. As people have now started realizing that building the retirement of dreams is a time-consuming process, most start working towards it right from their 20s as soon as they are employed.
But as with anything else, some mistakes are bound to occur when you are new to the world of saving and investing for the future. Some of these mistakes could have long-term financial consequences and might even significantly derail your plans. Learning from the mistakes of others is an excellent approach to avoid committing them on your own.
1. I Am Too Young to Think About Retirement
If you are in your 20s or 30s, retirement might seem like a lifetime away. But as you progress through your professional and personal life, it’d be easy to get lost in the process of solidifying your present. Your family will grow, and so will your expenses. Retirement planning will mostly take a backseat throughout this period.
More importantly, money needs time to grow. Having 25-35 years to work towards your retirement will always be more profitable than having 10-15 years. Also, by starting early, you give yourself enough time to make mistakes and recover from them.
2. I Am Too Old To Start Retirement Planning Now
Generally, people in their 40s who haven’t started planning their retirement entirely give up the idea as they believe that they are now too old to begin. However, it is never too late to start saving and investing for your retirement. Rather than depending on your kids or selling off your assets to keep up with the retirement expenses, you can start planning it now as there is still a lot that can be done.
With products like an annuity and pension plans, you can start building your dream retirement even if you are in your 40s or 50s. But you should not wait till they reach their 50s to start retirement planning. While one can surely take corrective steps at this age, it is better to start early.
3. Not Knowing How Much Money You Will Need for Retirement
Just like every journey needs a destination, you need to have a clear idea about how much your retirement corpus should be. While it might not be possible to calculate the exact amount, you should at least have a fair approximation of what you might need to retire comfortably.
You must consider your lifestyle, monthly expenses, healthcare expenses, and inflation while determining the corpus you might need. Also, it is always better not to carry any debt to your retirement. Try to repay loans like home, car, personal, education, etc., before reaching your retirement age.
4. Purchasing a Bunch of Insurance Policies Without Knowing What You Need
You regularly hear people talking about the importance of purchasing insurance. While products like health insurance, life insurance, and pension plans are crucial for every individual, it is wise to understand what you are getting into before making a purchase.
With insurers offering different insurance products, it is very easy to end up with policies that do not serve your purpose. Choose a reputable insurer and let them recommend the right products that match your needs and expectations. You should also research and compare on your end before making the final decision.
After working for decades, retirement is the time when you’d like to relax and indulge in things that you genuinely enjoy. As finances play a vital role in every phase of our life, working towards your retirement from an early age can take you closer to living a financially independent and rewarding retirement life.
Make a note of these common retirement planning mistakes so that you can avoid them and build the retirement life of your dreams. Consider professional assistance whenever you cannot decide, as their expertise and knowledge can save you from severe long-term consequences.