The majority of us have already started ruining our retirement planning unconsciously. There are some common but impactful financial mistakes you can make during your career journey that can lead to the depletion of your retirement resources. It will not be so pleasant not to have any financial assistance post-retirement. So, planning for a future full of wealth is crucial. Let’s dig into those mistakes in detail.
Here Are Those Common Mistakes Deteriorating Your Retirement Corpus:
1. Withdrawing From EPF
Every employee contributes 12 percent of his or her salary monthly to the EPF account. In addition to this, the employer is also mandated to contribute the same percentage to all employee’s accounts. The combination of these contributions creates a large corpus of funds for an employee during their career to access after retirement. However, many young professionals have started to withdraw amounts from their EPF in advance as pocket money. But they do not understand that they are destroying their retirement fund.
2. Not Considering PPF Account
PPF, or Public Provident Fund, is considered one of the most profitable, risk-free Government-backed savings schemes. It can offer you a large corpus of funds that an investor can utilize for his financial needs. For instance, a retirement fund, a child’s higher education, a child’s marriage, or any emergency that needs large amounts of money. So, not having a PPF account can be very troublesome.
3. Neglecting Health Insurance
One medical bill is all it takes to make a middle-earning individual bankrupt. Medical treatment is very expensive in our country. So, don’t neglect to buy Health Insurance.
4. Not Planning Emergency Funds
Always add an emergency fund to your financial planning. These funds are beneficial in times of desperate need that require money to eradicate the problems. Emergency funds can solve your problem with unexpected expenses.
5. Inadequate Retirement Funds
Financial independence and early retirement planning are a dream of every living soul. But don’t take it for granted and retire with a corpus that is not enough to fulfil your post-retirement expenses.
6. Paying a Lot of Investments
Before making an investment,, ensure you are not paying a high process or other related fees. Research properly and consider low-cost funds. You can also target direct mutual funds or NPS (National Pension Scheme) without any mediator.
7. Buying Low Budget Insurance
Buy insurance that is enough to cover your family’s medical expenses. You can lose your entire life savings with just one major medical bill. Moreover, in the case of life insurance, you should consider buying one that is enough to cover the significant expenses of your family in case of your death.
8. Starting Very Late
The power of compounding works when in the case of long-term investments. Starting late would not be the best idea. Your investments will not grow up to their full potential.
9. Underestimating Inflation
Underestimating inflation would be the worst mistake you can make. Your efforts to accumulate savings throughout your lifetime will be in vain if you cannot multiply them.
10. Not Considering Equity
Have a diversified range of investments in your account. You must include equity in your range of investments as it has a great potential to increase your investments.
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11. Decreasing Expenses Suddenly
Slowly decreasing your expenses is good, but a sharp downfall can indicate income reduction. Spend more on profitable assets, not on liabilities.
12. Not Buying a House
If you want to reduce your expenses with a significant margin, then consider owning a house. You must have a home before retirement.
13. Not Planning Taxes
Your pension and income tax are both taxable after retirement. To properly plan your tax liabilities on retirement income.
14. Overestimating Returns
It is good to know how much return you will get on your investments. But overestimating the earnings will be harmful to rely on.