In most Western countries, retirement planning is a planned approach to life after retirement, especially concerning living conditions and financial security. The people, as well as the State plan for it and everyone, has a sense of what’s coming. In India, though, we still see that this is not yet a topic that is being widely discussed or something that people are planning for. Many a time, seniors retire and then start wondering about what next?
While there are many life insurance companies and wealth management companies that are associating with individuals now, to help them with retirement planning, it is still not enough. The retirement corpus in many cases is limited to the Provident Fund and Gratuity, apart from some minor savings. This is especially so, if people have built/purchased a house, spent a lot on their children’s education and marriages, etc. And in case, there have been health spends, then that would have eaten into this corpus as well. So, it appears that we Indians are guilty of making a few mistakes with respect to retirement planning.
It’s never too early
The typical approach that most of us take on retirement planning is that we need to first settle in life, and then start planning, and keep planning for too late. The truth is that it is never too early to start planning for retirement. One can begin keeping aside a part of the income towards this as soon as we start earning. So, this is good advice that you can pass on to your kids who may be now earning. With lots of options like insurance plans and mutual fund investments, it may be a good idea to keep aside a minimal sum, quite early on to ensure that, by the time you retire, you do have an excellent backup to take care of your financial needs. Procrastinating this, it to a later stage, can become dangerous, especially since expenses will only rise with family and commitments.
Not making provisions for insurance
When young, we feel that insurance is not that important and that the premium money can be put to better use, for something else. However, the fact remains that health issues can crop up at any stage and medical expenses will make a significant dent in your savings if you do not also have employer-sponsored health insurance. Also, it depends on what kind of coverage, even if you have, like the amount, the nature of diseases, the number of dependents being covered, etc. Hence, it is better to have health insurance for your family members, especially if there is no other backup. Nowadays, there are insurance companies, that provide insurance for the senior citizens as well and it may be a good idea to check these out.
Do not carry your loans into retirement
If you have any loans like a house, vehicle, personal, etc., it may be a good idea to ensure that you pay these out and become debt free, before you move into retirement stage. Carrying the debt payback into the retirement could sit on you like a weight, especially if you are not earning regularly. It could be better to plan big purchases a little early on and ensure that they are paid back in full before we retire, even if it hits a few other things at that point in time.
Miscalculating the expenses
Another mistake which most people do with respect to retirement is to miscalculate the costs of post-retirement life. People may happily calculate a certain amount saying that I can happily lead my life with ‘x’ amount per month and save and plan accordingly. However, this would mean that we have not factored for inflation, accidental and unplanned expenses, or any major illnesses, etc. Living expenses will keep going up, and also if you do not have your own house, you may have to plan for rent/lease, apart from your regular household and medical expenses. Hence, it is best to prepare for an amount that is always slightly higher than what you feel is needed to be comfortable. In fact, with proper planning and implementation, slightly early on, it is even possible to continue to save and invest, way into your retirement also.