Mistakes to be Avoided for Successful Retirement

A successful retirement is attributed to financial independence, and a well-defined retirement plan can help you achieve this goal. Retirement planning requires a good amount of personal research, knowledge about the different options available and a well-structured time frame for creating a retirement fund. However, people tend to make several mistakes in this regard. Here are a few mistakes that you can avoid to ensure a successful retirement.

1. Not starting early

It is extremely important to start planning for your retirement at an early age. It will give you the option to accumulate a huge corpus over many years. There are several investment options available which make it easier for you to make an appropriate choice as per your goals and your current financial situation. You can even benefit from compound interest when you start investing early. Since one has less responsibilities at a younger age, it enables greater savings until the time you take up more responsibilities.

You can set a disciplined financial practice of saving regularly, which is extremely significant at different stages in life. Money-back savings plans, guaranteed return insurance plans, etc., are some of the best options for a secure long-term investment.

2. Lack of a proper financial plan

When planning for your retirement, financial planning plays a crucial role in coming up with a savings or investment plan. List out your basic daily financial requirements, short term and long-term financial goals and decide on the amount of money that will be required during your retired life.

As an important step, also consider the inflation rate. The cost of medical treatment increases as you age and it will get more difficult to bear these hefty expenses during the retirement phase. Choose options such as a term insurance plan with add on rider benefits such as the critical illness rider. Such an insurance plan will provide you with a life cover and also ensure the availability of a sum assured in times of need.

3. Choosing to invest in conservative funds

Conservative funds provide a safety net for handling a financial emergency. However, it will not grow your wealth as expected and required during your retirement years. Ensuring that you can fall back on at least 80% of your current monthly income during your retirement phase is important. Insurance products such as a Unit-Linked Insurance Plan (ULIP) provide a life cover for you and your family, ensure their financial security in your absence and also provide market-linked returns on maturity. You also need not worry about the investments as they are professionally managed. Moreover, you can also choose to switch between the funds as and when required to ensure better returns.

4. Not diversifying the investment portfolio.

Various financial products provide different features and benefits. Investments made in a single product can drag you down if the investment deteriorates due to some reason. For example, a combination of an annuity plan, a guaranteed return insurance plan with fixed, regular income and a ULIP can help build a retirement fund, provide monthly income and also aid wealth creation.

An annuity plan is a type of financial product that helps you invest a large amount to purchase an annuity that can pay you regular monthly income. The guaranteed return plan provides a life cover and, additionally, ensures guaranteed returns. The returns can be available as a lump sum or a regular income for a set income period.

5. Missing out tax benefits

Taxes can take up a significant proportion of your retirement savings. If you choose fixed deposits as part of your retirement investment at an early age, the maturity benefit will certainly entail tax payment. Choosing tax-efficient products provides additional benefits and in turn, contribute to your retirement corpus.

Life insurance products are quite tax-efficient as premiums as well as the sum assured and maturity benefits are eligible for tax benefits as per the Income Tax Act, 1961.

Conclusion

Retirement planning is an important step towards leading a peaceful and stress-free retired life. However, making a plan early, knowing how much to save based on a financial plan, relying less on conservative funds, diversifying the portfolio and choosing tax-efficient products will help you secure your retirement life.

Doesn’t the thought of retirement sound blissful? No work, no deadlines, and all your hours spent doing the things you love, like travel, painting, and even napping in the afternoon! If you want your retirement to be what you have always dreamed of, start retirement planning now and save a considerable retirement corpus in time. The online Retirement Calculator can help you plan your future financial goals and ensure you achieve them within the stipulated time.