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Retirement Planning: 5 Common Mistakes & And How To Avoid Them

5 mistakes to avoid while doing retirement planning

Each one of us has this ultimate goal of retiring early. Though ‘early’ is highly subjective, in most cases it means before you get a single grey strand in your head. Which makes it around 35-40 years? and true to the dream, most of us are working towards it diligently as well – with all the mental retirement planning and saving intel as well.

However, even after doing the best form of research and analysis there are still some very common mistakes that people end up making. These mistakes in the short term may not count much, but compounded over a number of years can throw your entire retirement planning haywire.

Which is exactly why they should be avoided at all costs!

1. Not being disciplined about your retirement planning:

Planning in your 20s for life in your 40s sounds like a very futuristic and far fetched approach. Which is exactly why most people do give it a conscious thought, but are not serious enough to walk diligently on the path. In your 20s, retirement planning may look like a far fetched concept and with the feeling of YOLO peaking in thinking about what’s going to happen 20 years from now may seem obnoxious.

However, be rest assured that if you want to leave the rat race successfully and move into a position where you are not juggling life between the 9-5 – being disciplined is more important than you think.

2. Not increasing your retirement fund regularly:

When you are saving money today with the idea of reaping benefits tomorrow, you have to take into account a very important metric – the rising rate of inflation. Which means that your money may not hold the same value 20 years down the line that it holds today. Thus, it is very important to increase the amount of money that you apportion to your retirement amount on a year on year basis. This will help your retirement planning fight the wall of inflation and ensure you have good returns on maturity

3. Not checking your retirement planning account frequently:

Your retirement investments are funds that you have to put your money in and forget. Right! However, it is imperative that you keep checking your account from time to time to see the performance of your investments and rejig them incase they fail to perform as per your expectations.

4. Not considering tax benefits or implications:

No matter which country in the world you live in – investing a sum of money regularly and receiving a chunk of money together does attract tax implications. In most countries there are a number of benefits attached to retirement planning, however these are only applicable when you invest in specified securities. Not considering these aspects while investing will not only put you in a major taxation hole but also make you end up spending a large part of the retirement fund in taxes and duties!

5. Not diversifying enough:

The number one golden rule of any investments is to diversify your portfolio enough. Putting all your eggs in one basket will do you more damage than good and should be avoided at all costs. It is best to diversify your retirement portfolio into a healthy mix of equity, debt, mutual funds and precious metals so that the fall or rise of one can be hedged by the other.

Retirement planning may sound intimidating, but if done meticulously it is the most seamless thing ever. An activity extremely important to ensure that you have a good amount of funds in your sunset years. Amongst other things, if you want to voluntarily opt for an early retirement – these are not the funds that will take you there. You have to be very clear about your priorities and only withdraw money from this retirement fund when you can no longer work or are too old to function.

 

 

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