Source with thanks from timesofindia.indiatimes.com
Retirement has a lot of positives but it does come with a lot of anxiety and worry. The biggest concern usually is about being able to maintain a desirable standard of living post retirement. While not planning can be quite disastrous, it’s also advisable to avoid some the common financial pitfalls that you could run into. The author, in the article below , lists out such pitfalls and how to mitigate those risks. Team RetyrSmart
Lookout for these common financial pitfalls that could ruin your retirement
- Underestimating the income needed post retirement
A majority of people have no clue about the approximate income they would need to live a financially independent life post retirement. A vague assumption is what people work around which if too high can be unachievable and if too low can lead to financial crisis later in life. Every individual has different needs and following any general rules can be misleading. Retirees tend to spend on different things and considering their lifestyle, the income needed post-retirement needs to be calculated. This can then translate into annual or monthly savings figures
To find Retirement friendly inputs in your Inbox
Subscribe to our Newsletter
- Underestimating Health Care Costs
This is usually an overlooked area of retirement planning. With medical insurance, people tend to overlook the rate of increase of premium every year and the ailments beyond the coverage of the policy can create a big hole in your pocket at an older age. Health care costs need to be thought over carefully to avoid unplanned expenses post retirement.
- All eggs in one basket
Whether it is Employee Stock Options or sheer trust in a company, most people tend to accumulate large amounts of stocks of select companies with them. They choose not to diversify because they think that they know these companies well. This is a high-risk behavior and it can diminish other investment avenues. A balanced portfolio of equity and debt can help your investments yield potential returns
- Easily accessible funds – What if I need the money?
Retirement planning is effective when the saving starts at a young age. It is a long-term objective and during the course of life, various situations increase the chances of utilizing the saved funds. Hence, it is imperative that such investments should have a lock-in period or a penalty for withdrawing before the due date. This acts as a deterrent and helps curb the tendency to break investments regularly
- Lack of Analyze – Assess-Adapt method
The world is going through a socio-economic change; more now than ever before. Sticking to a long-term financial plan without analyzing it can lead to a faltered output. A change of job, city, birth of a child, change in markets and many such factors demand an alteration in the savings pattern. With the Analyze-Assess-Adapt approach, re-examining the retirement plan once every few years helps take into account the market and lifestyle changes and make the plan more relevant.
Financial independence post retirement is the fundamental objective of a retirement plan. Avoiding the above-mentioned mistakes can help you achieve your goals and walk into the last phase of your life with dignity and peace.