Don’t Let Your Golden Years Turn into Lead:  Retirement Planning Myths Vs Facts

retirement planning

Retirement – most people start thinking about it when they are nearing mid-life. It’s when a reality check hits them, and they realise they are not so young anymore. However, it gets too late to start saving for retirement. They have a family, kids, and various other liabilities that they cannot plan for their golden years. The part of the problem is financial myopia – a lack of financial planning. Hence, it is crucial to plan retirement as soon as one starts earning.

retirement planning

However, how will you do that? Your friend is telling you something, your colleague is telling you something else and of all – the internet is brimming you with all sorts of information. People believe in so many myths around retirement that they hardly make a decision. Thus, here we are debunking myths around retirement planning because we want your golden years to remain golden.

Myth 1 – I’m still young, and I’ve time

Fact – Yes, you’re young. However, we are talking about retirement planning not retiring. It’s the biggest misconception floating around. Retirement planning must be done decades before you retire. If you keep waiting for the right time – you will forever be waiting. Remember, every day that passes can be compounded for your retirement corpus. So, use a retirement planning calculator and start investing any amount – but start today. Follow the golden rule – the earlier you start, the more will be your retirement corpus.

Myth 2 – My deduction for PF is sufficient for retirement

Fact – There’s no doubt that PF is an essential pillar in any retirement plan, but it’s not enough. If you’re relying only on your PF fund for your golden years, it’s time for that rude awakening. At 7% inflation, your PF fund will be insignificant to support you. Inflation consumes your savings and will spoil your plans of smooth post-retirement life.

At max, you will be able to survive five years after retirement. The average life expectancy in India is also increasing –  the current statistics measuring it at an average of 68.56 years. So, you still have a decade to survive after you retire.

Myth 3 – Investing in One Place is Enough

Fact – If you follow financial advice you will often hear – “Don’t put everything in one basket.” It’s true for retirement planning too. Putting all your money in one investment plan is a recipe for disaster. Instead, choose a combination of 4-5 different plans to secure your retirement. Invest in ULIPs (Unit Linked Insurance Plans), a retirement plan, equity, stocks, annuity plan, and NPS (National Pension Scheme).  A solid portfolio with a combination of different investments is a better option.

Myth 4 – I’ll have fewer liabilities once I retire

Fact – Less does not mean no liabilities. Once you retire, it’s a distinct possibility that you may have to pay less income tax or maybe even none. However, it depends on your investments and other sources of income including pension, capital gains, dividends and rental income. Furthermore, if you have a partner to take care of – you would need more than just a retirement plan. Investing in a term insurance plan is highly recommended so that your family is secured in case of a mishap.

Also, invest in instruments such as tax-free bonds, PPF, Mutual Funds and more where capital gains are exempted from tax.

Myth 5 – I’ll wait for a lump sum amount before investing

Fact – People wait to accumulate huge amount before they invest it for their retirement. It is a flawed assumption and not a wise one. Instead, investing regularly in a retirement plan or any other instrument is recommended. The amount may be any – regular and disciplined investments will help you reach the number you’re chasing for retirement faster. Hence, invest in a ULIP plan or even buy a retirement plan with annuity and get going. Waiting to accumulate enough savings before investing is merely an excuse. So, start now with whatever amount.

Conquer Your Fears with Facts

Nobody wants to feel financially insecure. Honestly, no one has to! However, facing financial truth is necessary to feel truly secure. Proper financial planning can not only make ends meet during the golden years – but also help sustain the current lifestyle of a person. So, if you’re serious about your golden years, make sure to plan well in advance. Use a retirement planning calculator to calculate your retirement corpus and start investing in a good plan. Insurers like Future Generali offer retirement plans that offer tax benefits under Section 80CCC.

About the Author: Ajay D

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