3 things no one will tell you about retirement planning
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1006 |
10/1/18 12:32 PM |
In your 20s, saving money for retirement doesn’t knock at all as it looks like a distant target. As soon as you hit the 30s, you begin to make better and hope to attain landmarks like a bigger car or better apartment. The time you start planning your retirement, you might be close to 40. And at this age, you are in no position to commit any more blunders.
Subsequently, at this point, there are three things that no one will tell you about retirement planning which help you build more corpus and make fewer mistakes.
- You may not make up for the lost time: Do not let retirement come latterly of your financial goals. You might want to spotlight on intermediary goals like marriage, house, car, and education before planning for retirement. The right approach is the exact opposite and simple. If you start early, your money gets more time to grow. If you start very late, you miss out on this benefit, called the power of compounding, which can increase wealth exponentially over time.
- You are ignoring inflation: Inflation is such a devil in the era we live. For those who ignore it, it is an even bigger demon. Inflation reduces purchasing power considerably. Let’s assume that the rate of inflation is 7%. This means that today’s Rs 1,00,000 will be just Rs 13,000 in next 30 years. Simply put, things will become costlier, and your buying power will reduce. If you ignore inflation, you will save much less than what you will need, going forward. The solution is to build a diversified portfolio with assets, which aim to beat inflation and offer long-term wealth creation. Experts believe equities have an ability to beat inflation and outperform all asset classes over the long term. If you ignore the daily volatility and simply look at the long-term, Indian equities have created substantial wealth for investors.
- Your health may not always be with you: In the modern age, we all lead a hectic lifestyle leaving little time for us to reflect on our health and wellbeing. So it is crucial to cover your health too in your retirement planning even if you are fit now. Build a suitable portfolio of insurance to include your health and life. Such policies will help you cover the cost of medical aid and related expenses. And in case of uncertainty, it will make sure your family remains sheltered.
Keep in mind to invest as early as possible to ensure lower premium, better coverage. Even if you are several years away from retirement, you should not avoid buying a health insurance, if you don’t have one. Opt for life insurance riders to extend the coverage while keeping the premium low.
Therefore, Retirement planning should be your priority. It is also an extensive process that requires planning and persistence of years. In the end, we all want to retire happily. With some homework, some savings and the best inevstment plan, one can effectively attain retirement.
Aastha Mestry - Portfolio Manager
An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.