Let’s face it. Each one of us wants to spend our retirement age leisurely. We envision the possibilities of travelling, picking up our old hobbies, or just spending days in calm. Naturally, there is no work-related stress so you can finally live life on your own terms.
However, you must have a proper retirement plan in place to ensure such comfort. There will still be expenses to take care of but no monthly pay checks. Therefore, you require a sizable corpus to enjoy the golden days of your life without worries.
So, to make an effective retirement plan, take a look at some of the most common retirement planning mistakesthat you need to avoid.
Starting investment too late
Perhaps the biggest retirement planning mistake you can make is not starting early. When you are young, it’s easy to fall prey to the illusion of abundant time and delay investments. However, you must start saving as soon as you start earning, preferably in your 20s.
This will give you more time to build a bigger reserve. One of the best ways to accumulate wealth for retirement is to put money in mutual funds (MFs) through a Systematic Investment Plan (SIP).
When you start investing at an early stage, your wealth appreciates much more as compared to later years. The returns on SIPs also benefit from the compounding effect. Thus, the sooner you begin, the better.
Miscalculating the future expenses
Oftentimes, you might underestimate the effects of inflation on your retirement corpus. Your investments and savings would lose some value in the future due to the depreciating value of money. To build an appropriate retirement fund, you have to consider inflation while computing your retirement expenses.
Additional Read: 5 Golden Rules of Mutual Fund Investing for First-Timers
Disregarding tax benefits
While planning about your future retirement, it’s equally important to consider your present savings. Taxes can eat into your income and drill a hole in your savings. Hence, you must choose an instrument that offers good tax benefits. For instance, you can invest in mutual funds like an Equity Linked Savings Scheme (ELSS) as it qualifies for tax exemption under Income Tax Act’s Section 80C.
Inadequate health coverage
As you approach old age, the probability of developing an illness also increases. It’s unfortunate but true that your medical expenses may grow near retirement. And medical bills can quickly eat away your savings. So, you must plan for facing such situations by including sufficient health insurance cover in your portfolio.
Get your money in action. Try the Tata Capital’s Moneyfy app
Looking to plan your retirement wisely? Use Tata Capital’s Moneyfyapp – an easy and quick online platform for your financial needs. Choose from a broad range of insurance plans including health insurance and term insurance.
Moreover, you can view diverse MF options, evaluate with detailed comparisons and invest by themes. Start SIPto build your retirement corpus as per your risk profile anytime, anywhere. Your financial goals are a few clicks away. Just download the app on your smartphone, sign up easily and start investing today!