Top 6 Retirement Mistakes to Avoid
Rightly referred to as the golden years of life, retirement is the time when you no longer have to worry about work and you can live the way you want. You can travel, pursue your hobbies and dreams, and even move out your home to live in the country-side and spend quality time with your family. According to the Future of Retirement Study#, 76% percent of working age people in India expect a comfortable retired life, but only 33% are actually putting aside money to fund that life.
Retirement as a phase is characterized by expenditures to take care of your responsibilities along with fulfilling your dreams. Therefore, in order to enjoy your retirement to the fullest and be able to fulfill your responsibilities, it is important to start planning your retirement finances from an early age and ensuring that you avoid common mistakes such as the ones listed below:
Mistake #1: Not Establishing a Solid Retirement Savings Plan
Saving for your retirement is a long term activity. You will spend many years of your life building your retirement savings, which is why it is crucial to have a plan in place. You should start by estimating your monthly financial needs after retirement keeping in mind the size of your family, the number of dependants you are likely to have in retirement, and the expenses for each person, including yourself. An immediate annuity plan is one such financial instrument designed specifically to meet the financial needs of people after retirement. With ICICI Pru Immediate Annuity plan, you are given a post retirement guaranteed income for a comfortable life. The Immediate Annuity-Retirement Plan gives you the flexibility to opt for regular or lump sum payouts which allows you to take care of your day to day expenses as well as notable life expenses such as medical expenses, expenses of child’s wedding and payment of outstanding loans etc. You can also claim tax benefits under the existing rules of the Income Tax Act 1961.
Mistake #2: Ignoring Tax Benefits
While it is important to think of the future, it is also crucial to think of your present when it comes to savings. Taxes can eat away your hard-earned income and put a big dent in your savings. This is why, when you draft a retirement plan, make sure to pick an instrument that provides you considerable tax benefits. Under the existing rules of the Income Tax Act 1961, you can enjoy tax benefits via a plan like ICICI Prudential’s Immediate Annuity retirement plan.
Mistake #3: Ignoring Healthcare Expenses
According to the Future of Retirement Study#, in concern with their retirement, 64% of Indians are worried about the rising cost of health care especially in terms of critical illnesses. Retirement is the golden age, but it is also the age that is most susceptible to critical illnesses and health issues. As you grow old, the risk of critical illnesses and your healthcare related expenses will also increase. Paying for even these critical expenses can put a significant dent on your savings. Therefore, having an insurance becomes a must at this age.
Mistake #4: Taking early withdrawals from your retirement plan
Taking untimely withdrawals not only hampers your overall savings but also increases your tax liabilities. Untimely withdrawals from your retirement plan reduces the amount of corpus saved for your retirement. Making such withdrawals eventually eat into your retirement funds. A better option would be to plan your investments in such a manner that one of them matures right when you hit 40 years of age. That way, you have a good bit of funds coming your way right in time to meet major expenses like buying a house. Like this, it’s important to plan your finances for each milestone between now and retirement, so you don’t dilute your returns.
Mistake #5: Carrying Debt into Retirement
With no source of income and a limited pool of funds, carrying debt into retirement can difficult to manage. Although most people plan for loan repayment through their regular income sources, it is crucial for them to plan for the repayment of such loan in unfortunate the event of their absence. With a plan like ICICI Pru Immediate Annuity your family can avail the entire purchase price used to buy the plan in case of your absence to pay any sort of outstanding loans.
Mistake #6: Thinking its Too Early
The best time to start saving is as soon as you start earning. Keeping in mind the current life expectancy statistics, if you retire at the age of 60, you still have another 20-25 years to your retirement. Savings and investment returns become the only source of income in your retirement years. Therefore, the sooner you start, the bigger pool you can create by the time you retire. Additionally, early retirement planning also opens up the possibility of an early retirement. Indians are now increasingly considerate of this facet and are starting their retirement planning earlier than the previous generations. According to the BankBaazar Savings Quotient Survey 2019*, the financial habits of Indians have evolved with the average Indian starting to build their retirement corpus fairly early, at around 29 years of age.
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