Retirement planning is perhaps the most important part of financial planning for any investor. If done right, you can retire with full financial security with enough to indulge yourself in your power years as well. With retirement planning, there’s no second chance; you either get it right or you fall short of your financial goals. This is precisely why you should take retirement planning as seriously as you take the rest of your investments.
The unfortunate truth is that many people who have created a retirement plan often end up not being able to follow through all the way to the end. As with any investment plan, there are many ways that you can make a wrong financial decision, either due to lack of awareness, or lack of diligence. Here are x mistakes that you should avoid completely while planning your retirement.
- Waiting Till It’s Too Late – Think you’re too young to start planning for your retirement? Think again. The best time to start retirement planning is almost immediately after you start earning. The longer you wait, the lower are your chances of achieving your financial and retirement goals. The way life works, your retirement will be looming on the horizon before you realize it, and by then you would have lost a lot of value that could have been utilized to secure your financial future post-retirement. There’s no point trying to time the market either, by the time you retire, the market would have gone through numerous ups and downs. What’s important is that you start planning for your retirement as soon as you can.
- Not Defining Your Needs – A lot of investors make the mistake of incorrectly evaluating their financial needs for the future. This is something that you must spend an ample amount of time on. Before you make any investment, you must clearly define your needs and goals with respect to that investment. Your portfolio represents your financial future the way you would like to see it. Without sitting down and clearly charting out your career and finances, it becomes exponentially harder to make a retirement plan and stick to it. Do not be vague about your needs while planning your retirement, remember that the decisions you make now will affect you directly once you retire. If you find it hard to clearly elucidate what you’re aiming for financially, then it’s best to approach a certified financial planner or a wealth management firm that can help you better understand your unique financial needs.
- Underestimating The Cost Of Healthcare – Healthcare will inadvertently be a major expense as you enter your power years. Even the healthiest individuals require visits to the doctor every now and then; as we grow older, the severity of the situation changes. Common cold in your power years can be a lot more bothersome than a bout of cold when you’re younger. The same goes for all other ailments as well. Make sure that you have enough insurance to keep you covered should any major medical expenses arise in the future.
- Assuming You Can Work Forever – You may very well believe that, but the truth is, we must all hang up the saddle at some point in time. Even if you plan to never retire, you will need to supplement your income in some way or the other to meet the rising costs of commodities and healthcare. It’s always better to be prepared for a day when you may no longer be able to continue working due to unforeseen circumstances. In an event like that, it is your retirement plan that will ensure that you have enough capital to be self-sufficient even when you’re not employed.
- Making Uninformed Decisions – The world of finance is not child’s play. It requires a certain level of discipline and understanding in order to become a successful investor. If at any point of time you feel that you are unsure about making an investment, or aren’t entirely clear about the terms and conditions, it is always better to take a step back and evaluate more before spending your hard-earned money. In case you feel that something is beyond your comprehension, feel free to reach out to a certified financial planner or wealth management firm. But under no circumstance should you make any decisions based on anecdotal advice from friends and family or your gut feeling. Get the information you need, and then decide on whether you’d like to go forward or not.
- Making The Wrong Investments – Depending on when you started investing and what your financial needs are, there are different investments types that you should go after. Remember that the same financial plan doesn’t work for two people. Each individual has their own needs and goals and their portfolio should include investment vehicles that drive them towards THEIR goals and not someone else’s.