Every middle-class Indian family has four major financial planning goals—buying a house, child’s education, child’s marriage and retirement. Most often, retirement planning figures last in the list of priorities and this is the most common mistake. Here are some bloopers you should watch out for when planning for your retirement:
Failing to start young: A surprisingly large number of people find excuses never to start retirement planning. No matter how daunting the debt or other spending priorities, you have to save for retirement on a regular basis, even if it’s only a small amount.
Failing to link portfolios: Most of us consider the investments made at work separate from our independent plans for retirement. However, only when you look at the plan as a unified whole will you be able to spot any shortfalls.
Failing to anticipate changes: While you cannot anticipate emergencies, there are a few big-ticket expenses you might be able to factor into your calculations for the retirement corpus. For instance, make allowances for expensive holidays or refurnishing your house, even if these plans are many years down the line.
Failing to evaluate retirement options: We diligently look at the perks that come with a job, but rarely pay attention to the retirement options. Given that most current offerings are skewed in favour of debt, it helps to know this and balance it out with your own equity investments. Also, evaluate the insurance cover offered by your employer and check its validity when you retire.
Failing to update plans: You might have made a will, listing out beneficiaries. Make sure you update your plan as and when required, say, when someone falls out of favour or predeceases you.
Failing to contribute as much as you can: Even if you can’t afford to touch the ceiling allowed under your work retirement plan, or individual retirement investments, this should be your goal.
Failing to reinvest windfalls: Unexpected income, be it windfalls, gifts or refunds, is best deployed in planning for retirement. These small amounts can add up in the long run.
B. Srinivasan is a financial planner