The basic idea behind retirement is a comfortable and stress-free lifestyle after years of hard-work. This makes retirement planning an extremely important task that needs to be undertaken early during your working years itself. However, the uncertainties of life could make you commit mistakes during the planning phase itself. These mistakes have repercussions and in turn could impact your post-retirement life.
The lack of understanding of financial products in the initial phases or retirement planning could lead to the selection of inappropriate products for your needs. Therefore, before opting for a retirement policy, it is important that you understand the common mistakes that people make and try to avoid these mistakes.
4 Retirement Planning Mistakes You Should Avoid
1. Ignoring the needs of your loved ones
This mistake emerges from not paying enough attention to the ongoing expenses and failing to understand how these expenses would look like in years to come. Assessing the needs of the members of your family is very important. Consider the number of your dependents, their medical history, and their way of living. In case you have kids, calculate their daily expenses and fees required for their higher education. Keeping these factors in mind will help you determine the sum assured needed for your retirement and other family needs.
2. Opting for a pension plan in the later phase
Ideally, the best time to buy a pension plan is when you’re young. That is because it is likely that you would have relatively fewer responsibilities at that time in your life. As life progresses, the responsibilities are likely to only go up. Hence, every young adult must start planning for his or her retirement right after they receive their first paycheck. Early retirement planning allows the substantial growth of funds through savings over a longer period as well as through compounding. Simply put, the earlier you plan, the easier will be the achievement of your financial goals.
3. Ignoring regular income needs post-retirement
Even after you retire from your active work life, the regular expenses in life do not cease to exist. This means that you will need a regular flow of income even after retirement. This can come from your accumulated corpus, but only when planned accordingly. It is not advisable to withdraw funds from the accumulated corpus left, right and center. Doing that could soon lead to your corpus getting depleted. An excellent way to generate regular income from your savings is by opting for an annuity plan as it provides guaranteed income for a lifetime.
4. Dipping into funds before retirement
We all have ups and downs in our lives. While you might be diligently working towards creating a good enough retirement fund for yourself, emergencies can force you to take emotional calls and you might end up dipping in to your retirement fund basket. Many people pull out the invested money from their retirement accounts in the case of emergencies. This happens not just for emergencies but also for some other needs, like higher education of children. Such needs are indeed important, but dipping in to your retirement fund is not the right answer. You should separately plan for such needs. In case you’re looking for covering your kid’s expenses, opt for a child plan. And save the retirement corpus to accomplish your post-retirement life goals and the needs of your family.
As highlighted above, retirement planning is vital for financial protection in the long run. Before buying a plan, research thoroughly, and choose a reputable insurance company. Also seek professional help to plan your finances. The right professional help will ensure error-free retirement planning.