Imagine yourself basking in the morning sun, sipping chai, with no pressure of rushing to the office at 9 am. Imagine not having to constantly brood over excel sheets late into the night, because you have a meeting with the boss tomorrow. Sounds tempting, right?

Retirement is supposed to be the most idyllic time of your life. There is no pressure to meet deadlines or attend presentations. You no longer need to put off your dreams, because you have all the time you want to start living the life of your dreams!    

But what we often forget is the fact this golden period comes with a permanent stop on your regular stream of income. What if you do not have enough money to support you through your inevitable health issues and other myriad expenses? Without strong retirement planning, your golden years might not be as golden as you would want them to be! Strong retirement planning is the foundation for a better tomorrow. Make sure you enjoy it to the fullest without any cash crunch or restrictions!

If you want to retire early, sound retirement planning is of prime importance.  After all, you have played a spectacular inning all your life, its time you retire in style. Here are a few mistakes you should avoid while you plan your golden years so that you do not face any difficulties during your best days:

1. Not giving retirement planning the attention it deserves

While that happens to be our favorite past time, your retirement planning is no joke. You need to carefully assess your expenditures post-retirement and choose your investment plans accordingly. You might want to go out for fine-dining every weekend or go on an international holiday every 6 months. All of these expenses need to find a place in your budget - or be cut down to maintain a healthy savings ratio (experts recommend about 20%).

Evaluating your budget in accordance with the kind of lifestyle you want is important. With a number in hand, you will a specific corpus to work towards while planning your retirement. Another important thing to keep in mind is to constantly track your retirement plan and its performance. You can also use retirement calculators available online for determining this corpus. Financial experts suggest that around 80% of an individual’s current income is enough to cover their retirement budget.

2. Starting Late

While it is never too late to start anything, the cardinal rule of retirement planning is to start early and stay invested. Starting late leaves you with a smaller window to build a significant corpus of money. The earlier you start, the more time you have to make your retirement period golden. Money is very similar to a plant - the longer you let it grow, the sturdier it becomes.

Picture this. Ramesh and Suresh, both intend to retire at the age of 60. While Ramesh begins investing Rs 25,000 every month at a rate of 10% p.a. from the age of 25; Suresh begins his retirement planning at the age of 45.

How does this pan out for them?

By the age of 60, Ramesh has amassed a corpus of Rs.9,57,06,918 - thanks to his investment window of 35 years. However, Suresh had a window of only 15 years. Hence, he ends up only with Rs.1,04,48,107 - almost 15% of Ramesh’s savings. Starting early makes all the difference!

3. Not accounting for Medical expenses
 

Old age, unfortunately, brings with it a host of health problems. Also, given our current lifestyle patterns, we are more prone to ailments like diabetes, and chronic pain. A good retirement plan is thus, incomplete if it doesn’t account for these medical expenses or a good health coverage plan.

A good health insurance plan that covers all critical illnesses will cushion your bank balance against unanticipated bumps. This can be tricky to figure out as insurance premiums go up with age. Budget accordingly and start early to grow your insured amount every year.

4. Not accounting for inflation

 

Your favorite chocolates cost Rs 50 today. But will they cost the same even when you retire? At the current rate of inflation (7%), they will cost around Rs 381 30 years later. Have you accounted for this change in the time value of money?

Inflation has the ability to eat into your investments, drastically reducing its value. Not keeping inflation in mind while planning your retirement corpus might leave you with almost no substantial income to enjoy your retirement days. Don’t let inflation ruin your golden days. Choose investment plans that keep pace with the ever- growing inflation rates for a stress-free retirement.

5. Not choosing the right combination of investment plans

 

For a financially secure retirement, you should choose a combination of investment plans that offer you a healthy return. Investing in a single financial instrument might not be enough to offer you good returns - it’s important to diversify. There is a whole range of pension plans, mutual funds, and other investment options that can help you build a solid retirement portfolio. You can seek advice from experts and financial planners before you decide to park your hard-earned money in a certain instrument for best returns.

After having slogged so hard all these years, you deserve a royal retirement. So, plan your retirement, avoid these mistakes and enjoy that much-deserved time of your life!

 

Feb 26/19

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