Many individuals ignore the importance of retirement planning as they know it’s not going to have any immediate impact. However, in this case, ignorance is not bliss. Giving retirement planning a snub can become a costly mistake. The ripple effect caused due to such an error can have a drastic impact in the future.
In this article, you will find out ways to sidestep 5 retirement planning mistakes people make.
A comprehensive retirement plan can help you live your golden years to the fullest. However, a few errors can put a substantial financial squeeze on you.
With that in mind, here are 5 retirement planning blunders you need to avoid-
- Not Saving from a Young Age
A common misconception many have is that retirement planning need doesn’t need to be done before entering 30s or 40s. However, by that point, most individuals have the financial burden of a house loan, parents’ healthcare, and children’s education fees. Amongst all this, saving for retirement may take a backseat.
Not planning for retirement from a young age can jeopardize all your golden years. Hence, it is recommended that you start saving money from your first job. This way, you’ll give yourself a few more crucial years to accumulate wealth for retirement.
- Having a Short-Sighted View of Your Lifespan
Not saving for retirement is dangerous. However, not saving enough is equally unsafe. For example, you accumulate a significant financial corpus for the first 15 years post-retirement. But what if your lifespan surpasses those 15 years?
In order to avoid this blunder, you shouldn’t underestimate your lifespan. Meanwhile, you can also take help from an online retirement calculator to figure out the estimated financial corpus you will need for your post-retirement life.
- Overlooking Investment Strategies
Taking a conservative approach for investment planning is a common mistake many investors make. While traditional investment schemes such as FDs offer good returns, their profits may look insignificant after maturity due to inflation.
Investments in equity and debt funds are slightly risky, but they also pay handsome returns. These funds offer interest rates that can increase your profits exponentially over a longer term. However, it is essential that you ensure your funds are diversified.
- Not Investing in Insurance Plans
Insurance plans financially secure you and your family against various threats such as a medical emergency, an accident, an untimely death, etc. For example, if a health insurance policyholder is detected with a critical illness, then his/her medical expenses get covered in the plan.
Without insurance, you will have to spend money from your pocket to pay for the expenses. These expenses can indirectly endanger your retirement savings.
Thus, most experts recommend buying health and life insurance policies. Furthermore, one can invest in something like ULIP to ensure financial security along with market-linked returns.
- Becoming a Spendthrift
Many individuals develop a habit of lavishly splurging money once they start earning. This habit never enables them to accumulate savings. Therefore, such a person might spend post-retirement years pinching every penny. One need to be careful when it comes to expenditures as it can help you make wise retirement planning decisions.
Now that you know these retirement planning blunders, ensure that you don’t commit them.