Introduction It is not practical to work your whole life. At one point all of us need rest and everyone would want to have a decent retired life. Government employees are lucky that they will be paid a certain amount of money every month as pension even after their term of service. That is not the case with employees working for private firms. Also for the government staff, the money that they receive as pension might not be enough for them to meet all their expenses. Hence everyone needs a proper retirement plan.
Common retirement planning mistakes Have you started planning for your retirement? You might be wondering 'Why Now'. Your retirement age will be many years ahead but it is always good to plan as early as possible. Your happy retirement life depends on how you plan it today. One day we all have to retire, so bear that in mind and work towards it. We need to consider many points while planning. In his article I have listed down few common points we forget or miss while planning our retirement. Consider all these points while planning so that you have a safe and smooth retirement life.
No proper calculation:The main mistake many people make is they do not calculate properly how much money they will require to lead a happy retirement life. Each of us have our own lifestyle, hence our money requirement will vary. One has to have a thorough idea of how he is going to spend his retired life. First and foremost we should be able to answer the following questions:
How am I going to spend my retirement life
We need to analyze all the above and accordingly draft a plan. Have a clear idea of all your savings and investments and calculate the expected returns from all the sources. Then you will have an idea of how and what is required for your future. Accordingly start saving or investing for a decent retirement life.
Underestimating the financial needs:Our income is limited but our expenses vary month to month. So we need to be prepared for all the changes. Our retirement life depends on the money that we save today. I feel we are consuming our retirement today buy upgrading our car, shifting to a new location and so on. We need to limit on our expenses to start saving high. If we lead a lavish life today, we will be left with less savings and our retirement life will not be pleasant. So it is our turn to decide. We might now think that so much amount is sufficient for a retired life, but did we arrive at that figure after considering our commitments, expenses, wishes and situations? No! Then we are underestimating our financial needs. At one point we will not be fit enough to work, and then if you realize the money you kept aside was not sufficient, what can you do? When you have money you will be surrounded with many people but when you don't have money, only few loved ones will be around.
Rather than struggling towards the end, be prepared in advance. Another mistake we make is we might calculate more returns from our investments, but as years passes by, the returns might decrease but our needs and expenses won't. If you are planning to lead your retirement life in your farm house and expecting returns from your plantations; you need to consider the chances of incurring loss due to bad weather, decrease in demand for your products due to changing economy etc. Similarly don't be too depended on savings in your bank account. Today the interest might be high but that might not be the case after few years. What if the interest rate drops? Are you prepared for that? Try to foresee things and plan accordingly to save sufficiently.
Lack of early planning:Most of us think about retirement and start planning for it just when we are about to retire and that is not the right time to think about it. In a year's time nothing is going to change. Some people start planning at the age of 50's or 60's but very few think about it at an early age. Wise people are those start planning from an early age. And the advantages are you get sufficient time to save, to decide and to find an extra source of income. We all need a house to stay, and many think about it only when they are about to retire. But then if you plan to construct a house, half your savings will be gone that way. Rather if you had considered it in advance and have constructed a house in your 30's, the savings kept aside after that point will remain as your savings. Constructing a house needs bulk investment, so is children's education. We need to keep all these factors in mind.
No one will provide us financial security, we ourselves will have to make it. We think we have plenty of time to retire, hence can save later. Remember time flies. As your children grow up, your expenses increase, hence your savings will reduce. You might not be able to save for future as expected. Time is a very valuable asset we have in hand, so utilize it rather than waiting for the last minute. As you keep on delaying it, the harder it becomes. When you have time, you just have to save little every month so that by the retirement age, you will have sufficient money. On he other hand, when you have limited time, you will have to save more every month which will make you struggle. Another point to be noted is, if we have plans of investing in a property, do that today as after few years you will have to pay double the amount.
It is not only about Money: Whenever we think about retirement we only think about money. Yes, money is required but along with money we need to give proper care to our health as well. It is rightly said 'Health is Wealth'. Only if we take proper care of our health today, tomorrow we can lead a healthy life and this will in-turn cut down on our medical expenses. Disregarding higher health costs can have serious impact on our financial stability. As we grow old our body will also not perform as it used to be earlier. We might have to undergo various health issues and money is required for treatment. Our limited income won't be sufficient for everything hence we will have to act today. Do proper exercise, practice yoga and meditation. These will not only help you in maintaining your health but also in leading a peaceful life.
At your old age, your children might not be with you as they need to go far off to find a living. If we are sick and bedridden there will not be many people around us to take care of us. Money can get you a home nurse and a maid but you will have to depend on them for anything and everything. Instead if you are a healthy person you can walk around with out anyone's support, you can do things on your own. Isn't that the greatest blessing? To be healthy and fit even at your old age, start working out today and lead a healthy lifestyle from today onward.
Plan what you are going to do: At-least in the initial years of retirement we can't sit idle. As our health condition becomes worse, we have no choice than to be at home. But otherwise as long as we are healthy we need to keep us occupied. Do something that is interesting. Find out your passion an invest so that you can enjoy your retirement life with a small income from your passion. Certain people make the biggest mistake of not planning these things in advance and get bored when they have to sit idle at home. Practice yoga and meditation so you can spend some time for that and it will help you to stay healthy.
Always find alternate source of income. By just depositing your savings in the bank and expecting to live on the interest that you get really does not work. The interest rates today might be appealing but there are chances that it might fall in future and things will not be in your control. Invest in something that can give you a steady income, buy properties so that you can lease it and get monthly rent from it, if you are interested in business, buy a shop and do some small business. It helps to kill time and also in getting an additional saving.
Conclusion The most important thing to consider when planning retirement is when exactly you want to retire. Accordingly make smart investments today to have a secure retired life. Investing in pension schemes, bonds, shares and so on will help you to cope up with the increasing needs you might come across in future. Act brilliant and cut down on your extravagance, this will be helpful for you when you are actually in need of money. There is no point repenting later about the money you have wasted during your young age. Today we have the confidence to make money as we are young but that might not be the case after 10 or 20 years. We will not be healthy always hence we need to keep aside a good amount of money for our future.
I am very happy on reading the article. The author presented the points in very simple English and in a very friendly way to understand. My appreciations to the author. These days what I am observing in the younger generation is that they don't have the concept of saving. In a private job, there is no guarantee for your job, forget about retirement. The employer may not like you or you may not like him. So in such case also you may have to be jobless for some time till you get another job. For such unexpected situations also we should be prepared. For that savings and planning of expenditure is very important. So it is better to plan the savings and invest our savings wisely so that they will give you good returns and come in handy in times of difficulty.
A practical article that makes me realize what mistakes I have done so far and how I've missed out on time so far. I agree with you, it is never too late to start now. Most of us like me have the traditional way of thinking that we start saving and the plan to invest. Sadly, we miss out on making our money grow judiciously while it is parked waiting to be used.
The suggestions of how to calculate sensibly are very good. Agree with you, often we underestimate what we need when we retire. We forget two things, what little we have will not have the same purchasing power 20 or 40 years later and we have to pay more for what we want 20 or 40 years later.
We have to bear in mind that we may be able to work until retirement due to illness or disability. Most of us save by parking funds in mutual funds or other investments. It's better to spread it out in terms of gold bond, deposits, land, mutual funds or shares for the simple reason it spreads the risks too (it would be unfortunate but a realistic possibility to retire at the peak of a real estate slump or market recession).
The older we are there higher are the risks that we would have to face to have a retirement fund and the harder we have to work to save. Retirement often comes as a sudden realization that we are definitely old, at times ill, struggling for daily activities, emotionally exhausted and last but not the least, finding that things (children, friends,cost of living) have changed. My father still says that in his early days he used to get coffee and breakfast for 3 rupees. Now I'm saying that I get coffee and a very basic breakfast for 30 rupees. I'm sure my son would be saying I get the same for Rs 300 a few decades later. This is how time and things change when we get old. So be realistic, be prepared. Retirement should mean good health, fair finances and an emotionally stable mind with a positive outlook for the last few years. It's better to be penny wise and not pound foolish now so that we have many pennies and a few pounds left for the later years.