Have you started planning for your retirement? Here are some common blunders to avoid.
Retirement planning? Now? But, I’m just 25!
Even if you’re years away from retiring, you must start planning for your retirement well in advance. The earlier you start stashing money as a retirement fund, the more corpus you will have when you retire. Though planning for your retirement may seem burdensome, it will actually help you enjoy a peaceful, stress-free life after retirement.
Here we list out a few blunders people have committed while planning for their retirement. We hope that you won’t make the same.
Picture your life after retirement
Do you want to travel, go to theatres often or eat out regularly? List down all the things that you want to do after you retire. Then, you need to set up your savings accordingly. Most people fail to picture their post-retirement life. But doing this is very important. It will give you an idea as to how much money you’ll have to save as your retirement fund.
Additional Reading: Are You Saving Enough For Retirement? Find out.
Not saving enough
Are you putting enough moolah into your retirement fund? If not, then it is time to do so! We recommend saving at least 30% of your income for your post-retirement needs.
As a general rule, it is recommended to start saving for your retirement when you start your first job. Why is this the ideal time? Mainly because you’re young and you don’t have additional baggage like loans to take care of. In addition to this, you have the power of compounding when you’re young.
But don’t worry, it isn’t too late to start. Equities, Mutual Funds, ULIPs and Insurance are some of the common investment instruments to park your retirement moolah in. Always remember that it is wise to diversify your investments rather than putting all your funds in the same instrument.
Additional Reading: Good investment options for retirement
Not considering inflation
How does inflation affect the price of a commodity? For instance, say a kilo of apples cost Rs. 60 today. With inflation at 5% annually, the same will cost Rs. 331 in the next 35 years. Shocked by the price shift?
Ensure that you keep inflation rate in mind while calculating your retirement savings (estimate).
Additional Reading: How To Beat Inflation
Not getting enough health cover
Our sedentary lifestyle is wreaking havoc on our health. As important as it is to keep yourself healthy physically and mentally, it is mandatory to get yourself an adequate Health Insurance cover.
Before taking a Health Insurance cover, you must ensure that it is sufficient enough to cover all your health complications, including critical illness. Also, don’t forget to take into account the rising cost of medical treatments in India.
Additional Reading: 7 Tips To Compare Health Insurance
Restricting your investments to one instrument
As mentioned earlier on, you should not restrict your investments to a single instrument. There are various investment options – ELSS funds, Mutual Funds, Equities, ULIPs, Insurance, Fixed Deposits, etc. Don’t just stick to safe investments but explore other options also. Besides, with time on your side, you can gain maximum returns from other unconventional investment options.
Additional Reading: 7 Unconventional Ways To Make Money
Keep in mind that your retirement fund is solely for your post-retirement income. Do not ever use it for other purposes.