Have you thought about planning your retirement financially? If not, it’s time you started doing it. Clueless about how to proceed? We’ll help you out.
Are you all set to lead a comfortable retired life? What? You haven’t even given it a thought? Don’t worry. Like always, we know exactly how to help you out. Like everyone else, we’re sure even you want to live a worry-free retired life, don’t you? To do that, you need to stay ahead of the game and plan your finances well ahead of time.
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If you think that you have a lot of time to plan your retirement, you’re wrong. Given how rapidly the inflation rate is going up, you need to start saving as early as you can. Otherwise, what looks like a decent retirement saving now will merely look like peanuts later. So, the question still stands, ‘are you ready for retirement?’ To find out the answer to this question, you need to run a quick check on your finances. If you aren’t quite ready and have decided to go ahead and make a retirement plan, you’d do well to avoid the following mistakes.
What are the worst retirement mistakes anyway? Worry not. We’ll help you figure everything out. Start taking notes.
- Think you have enough time left to start? Think again.
If you’re in your 20s or early 30s and you still think that you have enough time to start planning your retirement, you’re wrong! There’s no perfect time to start, but the sooner you do, the better. It’ll benefit you in the long run. The earlier you start planning and saving, the more you’ll be able to save. Yes, that’s the secret behind successful financial planning for your retirement
Additional Reading: Invest Young, Retire Early
- Relying on short-term planning
One of the biggest threats to your comfortable retirement life is short-term planning. That brand new car might make your garage look prettier and shinier now. But if you don’t plan your purchase well, it might just end up wrecking the dream of your happy retired life. Don’t let a short-term fantasy destroy a long-term dream. Think smart and plan better.
Additional Reading: Essential Pre-Retirement Planning Questions
- Choosing the wrong places to invest
Investing in the wrong places now can turn out to be a nightmare later. That shouldn’t stop you from investing. All you need to do is get your facts right and look for the best possible investment options. SIPs could prove to be a good investment option, provided you’re well aware of how the stock market functions. Investing in stock market has another advantage. If your luck works in your favour, you could make a good profit. In case you don’t want to invest in the stock market, you could also try other conventional methods of saving. Open a Fixed Deposit and see your money grow (faster than other possible saving methods). In case you’re too confused about where to invest, you must consult a financial expert. They’ll help you figure things out.
Additional Reading: Your First Steps To Investing In The Stock Market
- Overspending on less significant things
Pampering yourself once in a while by buying something you’ve wanted for a long time is okay. But doing it time and again might not be a great thing for your finances later on in life. At a later stage of life, it won’t matter if you have two cars or ten. But when you’re old and need some cash for a medical emergency, your bank balance or those extra savings will definitely make a huge difference. Precisely why, in addition to Health Insurance, you must think long-term and restrain yourself from spending on less significant things. The golden rule for purchasing something big is to think twice and see if that thing will make sense ten years down the line. If not, it’s better to avoid making an impulsive purchase.
Additional Reading: What Are The Best Ways To Invest After Retirement?
- Falling prey to money-making scams
If you keep running after shortcut methods to make more money, you’ll be more likely to fall for money-making scams. These frauds might be able to take a shortcut and make money out of your gullibility, but you are unlikely to gain from them. If you want to see your money grow faster than usual, you need to plan your investments well. This desperation to double your money as quickly as possible is what makes you the perfect prey for fraudsters. It’s good to be ambitious about saving more, but you also need to keep your financial safety in mind. That doesn’t mean that all of these ways to make more money are a trap. There could be some genuine ones as well. It’s up to you to research well and ensure that you’re not talking to the wrong people. It’s your hard-earned money after all. It’s better to be sceptical now rather than being sorry later. Spend some time researching and make a well-informed decision. It will prove to be good for you in the long run.
- Cashing out that pension early
Government employee? Well, you’re lucky to have the option of getting a pension but the actual benefit lies in utilising it well enough so that it’s of help when you actually need it. That’s why it’s crucial to keep your hands off that pension money. In case you need some extra cash immediately, it’s better to check all other options before touching that pension money. That should be your absolute last resort (actually, not even that). If you cash out early, you’re more likely to miss out on the benefits. Don’t want that, do you?
Additional Reading: Pension planning for retirement!
- Not making tax calculations
Before opting for multiple retirement plans, you need to research well and find out everything about how they’re taxed. It’s a no-brainer that you should look for the most tax-effective retirement plan. Since this is slightly more complicated than it sounds, you can consult a financial advisor (to be on a safer side).
- Being too helpful (financially)
Helping your close friends and family in need is commendable. After all, it’s a crucial part of being there for them. While providing a helping hand to them is great, you need to think about yourself as well. Your financial security is quite important as well. If you lend money to people, you need to be careful about getting it back. Sometimes, people tend to take advantage of your niceness and might not even pay you back. Maybe that won’t affect you now, but when you face financial trouble yourself, you’ll realise your mistake. You can always direct them in the direction of BankBazaar if they’re in need of a loan. A Personal Loan or even a Credit Card might be just the thing to tide them over.
Be smart and lend smartly!
Additional Reading: 10 Vital Rules To Follow When Lending Money To Family And Friends
- Not planning those big investments wisely
No matter how long you’ve been eyeing that huge mansion for, before applying for a Home Loan, it’s better to take your finances into consideration. It’s not bad to think about making your dream of living in a huge house come true. But you also need to think about your other dream; the dream of living a comfortable retired life. Failing to prioritise well might land you in hot water later. It’s not just about buying a house; you need to be careful with any kind of big investment. It could be an expensive sports car or motorbike, the latest LED television set, or anything else. That huge mansion won’t make any sense if you don’t have enough money to pay for your daily expenses later, will it?
- Taking medical expenses too lightly
Right now, you might be in pink of health and as a result it’s hard to imagine a rough medical patch in your life. That, however, shouldn’t stop you from planning ahead of time. In your old age, you’re more likely to be vulnerable to health issues. You might not have any idea about your future medical expenses now, but that shouldn’t stop you from planning. Explore various Health Insurance policies and choose the one that best fits your requirements. Underestimating your health issues is bad. Ensure that you’re well aware of the actual health benefits of your policy. It’ll help take care of all those unwanted extra medical bills later.
- Getting financial products you won’t need later
You might come across a couple of investment options now. It’s good to invest and see your money grow. The tricky part? You need to get your investments right. You can’t invest anywhere and everywhere. Apart from taking care of your short-term needs, you also need to think about the future. To make the most of your money and to ensure that you don’t block it unnecessarily, you need to research well. Before you go all-out looking for more and more investment options, ensure that you’ve covered your future requirements well. In your old age, you’re going to be more vulnerable to medical issues. It’s better to think long-term and invest accordingly instead of investing just to save tax. Tax saving is an important part of your investments, but you also need to think about the bigger picture.
- Retiring too early
While in some cases, an early retirement is unavoidable. It’s advisable to continue working for as long as you can. Why? Because you get an active salary for a few more years and get to save better too. We understand that you want to live a worry-free life and start doing that as soon as you can. Without all those worries of having to meet deadlines, do that annoying paperwork, or attend all those client calls. But hold on there! Don’t taking a voluntary retirement just because you’re too tired of doing all this or just because you want freedom. It might sound awesome in your head, but think again. No matter how cool it sounds, nothing beats the security of having a regular income at your disposal every month.
- Not planning things right
If you think that the way you’re saving right now will magically suffice for your retired life as well, wake up! You need to get down to some serious planning, as early as you can (unless you want an overly-stressed-out retired life). You don’t need to worry as long as you have it all planned (on a sheet of paper). Yes, that’s how serious you need to be about it. While chalking down the perfect retirement plan, don’t forget to take into account your current financial situation as well. Working towards a happy retired life is good, but you also need to think about your present financial situation. Don’t overdo it. Your current financial situation is as important as your retired life. Try to strike a balance between the two.
We’re sure that we saved you from making the biggest financial mistake(s) of your life. Didn’t we? Let’s simplify your life even further by giving you some tips on how you can start saving early for your retirement, shall we? Here we go:
- Figure out your needs
The first step to simplifying your retirement planning is knowing exactly what your needs are. Think long-term and remember one thing—by the time you enter the glorious retired life, things would definitely be more expensive than what they are now. Take inflation rates under consideration and plan accordingly. Remember, if you start early, you’ll have enough time to reach all those retirement saving targets.
- Build a retirement fund
After figuring out all your needs, you need to start building that retirement fund. Don’t think that since you have a couple of loans to pay-off, you still have time on your hands. Well actually, you have enough time till you retire. But to be on a safer side, and save as much as you can, it’s better to start working on that fund right away. Focus on repaying all those loans, as being financially stable and worry-free is an important part of a happy retired life. Unless, you want to sit in that rocking chair, worrying about all those annoying EMIs. The choice is yours.
- Make some lifestyle changes
Small changes can make a huge impact. While you must pamper yourself and indulge in some luxuries once in a while, it’s better to keep your retirement in mind. You don’t really need to look around to find ways to save more. All you need to do is bring some minor changes in your lifestyle and you’ll be set. Small hacks like cooking and eating at home more often than eating out can help save a lot. Think about these hacks.
- Explore stocks and bonds
Want to see your money grow faster than usual? It’s time to explore the stock market, friend! Once you understand the functioning of stock market, you must start investing aggressively. To reduce the chances of risking your investments, it’s better to diversify your stocks. Also, you could look into various retirement-specific investments as well.
Additional Reading: Your First Steps To Investing In The Stock Market
While making some kickass plans for your retirement, we hope you don’t overlook the financial aspect. Want to make and investment for the future? Investing in Mutual Funds might not be such a bad idea. If you haven’t yet tried it, why not give it a shot?