Can you survive without your income for a year? How about 6 months or even 3?
If your answer is a big ‘NO’, then imagine this, a standard retirement period is usually 15-20 years. That's how long you will have to survive without a steady source of income. The definition of retirement has changed from relaxing and sitting idle to people finally chasing their dreams and fulfilling their passions in life, without having to worry about their savings.
Either way, you will need a nest egg to maintain your lifestyle. Which is why an effective retirement plan is mandatory. If you don’t plan your retirement well, the sudden lifestyle changes will affect you adversely. Today’s gig-economy has completely changed the idea of retirement. It is a free market system in which temporary positions are common and organisations hire freelance workers for short-term work. Even though it comes with its own perks, like flexible work hours, short-term assignments, part-time contracts, etc., it can impact your retirement because there is no steady income flow.
Despite knowing all these facts, we still tend to make mistakes that hamper a happy retirement. Here are a few mistakes that need to be avoided to enjoy an uncompromising retirement.
1. Not planning early enough
People are so busy with their lives that they only tend to concentrate on things that affect them in the present. People tend to procrastinate saving for their retirement, since an early retirement is considered a luxury. Most people only start to think about it in their late 30s or 40s, by when it becomes too late, with a lot of other financial responsibilities such as a home loan or children’s marriage piling on.
Planning an early retirement is a safe and secure option in the long run. Planning and saving for your retirement at an early age will offer peace of mind and the opportunity to chase your passion that you couldn’t all through the years due to your busy career.
2. Ignoring the inflation rate
People tend to neglect the effect of inflation on their retirement savings. However, it is one of the biggest financial risks to your retirement goal. If you don’t fall under the ‘higher income retiree’ category, then there is a big chance that it is going to affect even the most basic essentials in your life, such as food, medication, etc.
A wise decision to make here is to choose investments and plans that keep pace with inflation. Take the necessary steps by planning to offset the impact of inflation and you can experience a worry-free retirement.
3. Living life too large
It is important to inculcate the habit of saving from a young age. During the initial years of employment, you have the advantage of time – enough to plan and save. Though it might seem difficult to work towards this, it still is a necessity for a comfortable retirement. Spending a large share of your income without saving for future can lead to a serious money-crunch down the line. Remember, you will have to stop working someday!
4. Constant updating of your retirement plan
It is crucial to keep a track of your retirement plan. Just like the weather, the world we live in is also very unpredictable. Days might seem sunny now, but there is always a chance that a rainy day might come by. It will help you will need to have a backup umbrella to protect yourselves from any crisis.
Keeping a check on your retirement plan and keeping it updated will help you in coping up with any crisis that comes your way.
5. Not choosing the right government and private schemes
Apart from only focusing on primary matters, it is equally important to save an adequate amount for old age. After all everyone wants to tick off their bucket list or re-plan the missed holidays during their retirement period. Prices of day to day items are only increasing and money that we think has a high value denomination today is only becoming a mediocre sum by tomorrow.
Hence, it is vital to figure out an effective pension plan by investing in right government and private schemes like National Pension Scheme India (NPS), Atal Pension Yojana, National Social Assistance Program (NSAP), Provident Public Fund (PPF) and a host of other asset classes such as mutual funds, real estate, fixed income securities, etc.
6. Health is wealth
Health has a direct impact on our retirement plan, although we are all aware of that, a lot of us fail to realise just how important it really is. Today’s fast paced lifestyle has only brought more harm to our health conditions. New diseases and ailments are sprouting up every day and to top it all healthcare facilities are only getting more and more expensive.
Investing on good health schemes and plans are crucial and it will help in not burning up your retirement savings.
You have worked hard, and you deserve a worry-free retirement. So, avoid these mistakes and have an amazing retirement.The writer is Co-founder & CEO of CapitalQuotient