Having a planned approach helps in all situations. This becomes especially true for personal financial planning. As retirement planning is a central pillar of financial planning, it is important that we work towards it diligently. The increase in the life expectancy rate as well as rising healthcare costs have made savings the need of the hour. Retirement planning helps you to take stock of your current savings, your daily expenses, and then establish your retirement budget to meet your future expenses so that you can maintain your current life style even after you stop actively working.
While retirement planning ultimately leads to several benefits, there are also myths or misconceptions around retirement planning that you should be aware of.
5 Retirement Planning Myths Debunked
1. It’s too early for retirement investment
The most common myth about retirement planning is that an investor cannot purchase a pension plan or a retirement plan at a younger age. However, this is not true as an early retirement investment is actually the most beneficial from an investor’s point of view. Ideally, the right time to start retirement planning is right from the beginning of your work life. Early planning ensures more for you to save, invest and see the investments grow to realize your life goals in the future.
2. The risks involved in market-linked products are huge
There is no denying the fact that an investment in market-linked product comes with some risks. However, there are ways to offset such risks. Hence it becomes important to understand your risk appetite and then invest accordingly in an appropriate product. For instance, a Unit Linked Insurance Plan (ULIP) allows the selection of funds based on the risk appetite. The debt funds involve fewer risks, which is ideal for conservative investors. Equity funds have higher risk but potentially provide higher returns than other fund options.
3. Investment at an older age is illogical
If someone tells you that you should have started early investments for retirement, they are right. But if they then say that you should not invest for retirement just because you are not young, they are absolutely wrong. The famous adage ‘better late than never’ holds true specifically in terms of retirement plans. The retirement benefits are applicable for investors who invest either early or late. While a policyholder with substantial risk tolerance can invest in equity funds, an individual with less risk appetite can opt for debt funds. You can also choose to have a combination of both, that would suit your needs.
4. You don’t have enough to invest
The chances of receiving a substantial income are significantly low at the start of your career. The lack of adequate funds shouldn’t stop you from planning for retirement. Find yourself a pension plan which allows annual premium payment. Start by investing smaller sum of money when you are young as you have ample amount of time to reach the retirement period. Over the due course, your accumulated funds will grow, which will eventually help to achieve your long-term retirement goals.
5. Retirement savings can be used for emergencies
While you must have saved a sizeable corpus for your retirement, you could be tempted to dip in to those savings for various needs. Dipping into this fund before retirement is not the right way of investment planning. Pulling out money for emergencies will eventually exhaust your retirement savings. You must build a separate emergency fund to cover for contingencies. Save your retirement income to achieve your retirement and other life goals.
If you plan well, it will help you live a comfortable life even after you stop earning. The key to a stress-free retirement period is to start planning early. This could also enable you to pursue other interests like traveling or other hobbies after retirement. Moreover, a steady retirement income would also help you to safeguard the needs of your family with ease.
