Retirement planning is one of the most important types of planning process that you should do and have to go through it with utmost care and concentration. Planning for your retirement has a very important step that you have to take; it is looking and taking up a pension plan. You need to start planning for your retirement as early as possible after you have joined the workforce. As a person, mostly, only has one retirement, there is also only one process of retirement planning. Hence, things can go wrong once in a while as you can be misguided or mislead or maybe do not know where to start from.
Planning for retirement involves taking up a pension plan which comprises of all the steps you need to do for the planning. So, what are pension plans! Well, these are the kind of plans which will help you to get the money that you require after your retirement as you will not be getting an income from your job post that.
Retirement planning can be done to take up a pension plan is also called a retirement plan. A retirement plan is a plan that will help a person who takes up the plan to accrue a sum amount of money during a term. It is done so that that money can be used by the plan holder as well as their family in times of need like after their retirement from their job when they would not have a steady income to rely upon and use from. This kind of amount can be of great help when your savings have been depleted as they do over a period of time. This money can be also used for the fulfilment of any post retirement goals that you have. Also, if in the event of any emergency situations which require huge sums of money to be shelled out and you do not have the support of your regular income, the pension plan income or corpus might be the resource you could rely on.
An individual can choose any type of pension plan out of the following to invest their money into according to their requirements and preferences. The 8 options are as follows:
- With Cover and Without Cover Pension Plans
- Pension Funds
- Guaranteed Period Annuity
- Immediate Annuity
- Deferred Annuity
- Annuity Certain
- Life Annuity
- National Pension Scheme (NPS)
What retirement planning mistakes to avoid?
To avoid making such mistakes, read on ahead so that rookie mistakes and blunders can be avoided for a smooth retirement planning and an even smoother post – retirement fund:
- Not starting early
You need to start planning for your retirement as soon as possible. Not starting early is a huge mistake that a lot of people make when it comes to planning their post retirement lives. Post retirement should be planned for since the very beginning of you joining your job.
- Underestimating your requirements
You invest into the pension plans in order to accrue an amount for the future. The amount that you have in mind will give the investment amount its number. It means that your investment amount will be decided by the sum amount that you wish to accumulate. So, if you underestimate the amount that you require, the investment premiums will definitely be low but then the pension fund amount will also be low and it will completely tamper the purpose of the investment. So, never underestimate your requirements.
- Neglecting possible medical expenses
Most of the people retire at the time when their age is around 60 years. For most of the people that is also a time when they might be prone to health risks related to old age. So, you need to make sure that you also include medical expenses into your retirement planning. Taking up a pension plan which will also focus its priorities towards medical expenses is a good way to avoid the mistake. One can also include a certain amount of money into their post retirement fund to have an extra amount of money separately and only for medical usage.
- Not keeping in mind about inflation
If you have certain things that you are saving up for like to buy a house, owning a land property, investing into business, etc., you would have an estimated idea about how much that would cost. So, you make the investments in accordance with that. Hold on! You also need to consider the fact that a few years down the line, when you would probably retire; the prices are not going to be the same. Do not make the mistake of not calculating inflation rates and adding them you your required amount.
- Not considering taxation
Income tax is payable on more things than just salary. So, do not make the mistake of thinking that you will not be taxed after your retirement. There are many incomes like property rents, pension from employers, shares, etc. So, you also need to keep in mind that you will or might be taxed on many of the incomes that you receive. You need to consider the amount for those taxes as well when you are planning for your retirement.
- Putting all the investments into one fund
Diversification is always been a good thing! Do not make the mistake of putting all your money into one investment fund. Your funds should be spread across diverse and different investment funds, fund markets, etc. so that you can get the maximum returns on those.
- Borrowing or loaning from your plan
Taking a loan from your retirement pension plan is a very costly mistake one can make. Make sure you find elsewhere to take a loan from.
Avoid making these mistakes for a good retirement planning process as well as a smooth post retirement living. Invest into pension plans only after you properly do your retirement planning so that all risks are eliminated and all factors are considered.