After a long work life, everyone wants to feel financially secure in retirement. To ensure this, you must take certain initiatives before you reach that phase. This is why it is important to start retirement planning from your younger days so that your retired life can be worry-free.
While you are aware of the retirement phase, if you don’t take adequate measures to secure your life after retirement or make mistakes in planning investments for retirement, you might get undesired outcomes. Thus, it is important to realise what mistakes you might make while planning your retirement investments to avoid them.
Here’s a list of five big retirement-plan investing mistakes you might end up committing while planning investments for retirement.
Retirement seems to be a far reality when you are at the start of your career. Hence, people tend to start planning for retirement in their early 40s or beyond. They don’t realise that the earlier they start investing for retirement, the larger will be the total corpus accumulated by the time they retire. After your retirement, if you stop investing, you will still be able to reap the retirement benefits as the accumulated investment will gain interest and give you considerable returns.
Inflation depreciates the purchasing value of money over time. If annual inflation is 6%, then your cost of living will also elevate by 6% from the present scenario. You might make the mistake of not considering the inflation factor while calculating the amount you would need to survive after retirement.
Thus, you must invest in instruments that would yield a higher return than the inflation rate. You may tend to invest in low-yield instruments to ensure safe returns. However, this might lead you to earn a negative return rate in the inflation phase. So, you should invest a considerable amount in equities as they are known to yield a higher return in the long run.
In India, a wide variety of retirement investment plans are offered. The plans have different features, requirements, and benefits. While choosing an investment plan, you might make the mistake of not reading its features or benefits in detail. This can lead to investing your hard-earned money into a plan that might not meet your financial goals post-retirement. Thus, while opting for an investment plan, make sure you go through the benefits it offers after the accumulation phase, tax liabilities, period of maturity, liquidity of the plan, etc. This will help you ensure that you invest in the right plan and receive the optimum benefit from it.
One major mistake that you must avoid in your retirement investment is opting for premature withdrawal. To ensure this, you need to pre-plan your future financial needs and take financial emergencies into account that might occur during your accumulation phase. If you opt for withdrawal before your retirement plan matures, then you will only receive a part of your invested sum as the surrender value. Thus, you will end up incurring a loss on your investment.
If you believe that part of your salary kept in the Provident Fund or given as a pension will be enough to bear your expenses after retirement, then this can be too optimistic about being true. You might need more money than your retirement funds due to financial emergencies like illness. Thus, it is a huge mistake to depend completely on your retirement funds from your employer. You must research and invest in the best retirement plans to meet your various financial needs after retirement.
Now that you are aware of the retirement-plan investment mistakes that people commonly make, it is a good time to start planning for your retirement. You must avoid committing these mistakes and use the retirement calculator to make better and more secure retirement planning. And while planning your retirement investment, consider factors like present financial status, inflation, life expectancy, daily expenses, long-term financial needs, and more.
To know more, please read the relevant articles at our website PNB MetLife.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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