Retirement is probably the most important stage of an individual’s life. It is a phase when you do not want to be riddled with any financial burdens and are mostly planning on enjoying your sunset years in a calm and relaxed mode Retirement planning should be a part of every individual’s financial planning as it is a stage where there won’t be much income sources left when you retire. Also, there is a chance that you might need more money when you retire than you need now.
Here are a few mistakes one should avoid while planning their retirement:
1. Planning without being realistic
A lot of people wish to retire in their 50s and some even aim to retire by the time they hit 40 years of age. The only problem here is that there isn’t anything that these people are doing to become financially stable enough to take voluntary retirement. Hence, it is necessary that you start saving more from your monthly income and invest this money in solution oriented schemes like retirement funds if you want to retire early.
2. Not saving any money at all
You do not want to make this mistake. Having zero savings for your retirement years can be the biggest mistake of your life. If you have a pension scheme offered by your company, think whether that money is going to be enough for you to survive for the rest of your life. Living on a fixed income isn’t an easy task in itself, and if you do not save enough, things might get more complicated in future.
3. Beginning to save just a few years before retirement
Remember that building a retirement corpus isn’t something you can achieve in three or five years. And hence, it is better that you start saving for your retirement at an early stage in your professional career. Start with a small amount but make sure that you regularly invest because if you keep a long term investment horizon, you stand a chance of benefiting from compounding.
4. Having any debts or loans till the last moment
If you have any unpaid bills like credit card bills or have any outstanding loans or any debt, make sure that you clear them all before you retire. The last thing you want to be is debt ridden while living on a fixed income. Hence, clear all your debts well before time so that they do not come to haunt you in your retirement phase.
5. Investing without a retirement plan
As you near your 40s you will start receiving a call from agencies asking you to invest in retirement funds. But before investing anywhere, it is necessary that you have a retirement plan charted out. If you do not have the knack for planning, seek the help of a professional who can help you with the right investment strategy and help you in building a wealthy retirement corpus.
6. Do not liquidate your retirement fund
A lot of individuals, when in dire need of cash, tend to liquidate their retirement fund thinking that since they have a lot of time to retire, this should not affect them in future. But remember that several retirement plans have a lock-in and withdrawing from your retirement fund might cost you. Hence, have a diversified investment portfolio so that you have funds you can liquidate at such vulnerable moments.
7. Invest in the highest performing retirement fund
It is always better to invest in a fund that offers low but consistent returns than investing in a top-performing fund. Remember that some funds are one-season wonders and just because they have given higher returns in the past one or two years that doesn’t necessarily mean that they will continue to provide similar profits in future. Hence invest in a fund with a proven track record rather than opting for high performing funds.
We hope that you avoid the above mistakes while planning for your retirement. Retirement planning should not be taken lightly. You have to make sure that you manage to financially secure your future so that you can lead a happy and stress-free retirement life.