Common Misconceptions about Retirement and how to overcome them
Retirement marks the end of your professional life. It is the time when there is no steady flow of income for you. It is the time when income drops but expenses rise or remain the same, making you more and more worried about your family’s living standards. Worries may lead to several health-related issues like diabetes and high blood pressure and so on. The best way to keep financial worries and tensions at bay during old age is to start planning for retirement as early as possible.
There are three important components of a successful retirement planning- saving, investment and insurance. Retirement planning is incomplete without the absence of one of the three. It is advised that contribute a certain percentage of your money to your savings account every month. Invest in equities and other high-risk instruments until you turn 35 years and gradually slow down your risk tolerance by investing more in debt instruments after you cross 35 years. You can also buy insurance policies for life coverage, for your child’s education, for health coverage, for annuities and so on.
Retirement is inevitable in the life of every working professional. But many people fail to plan for retirement successfully. This leads to depression in old age as they have to solely depend on their children for financial matters. This kind of unsuccessful retirement planning stems from some common misconceptions that most people have about retirement. 3 of the most common misconceptions are as follows:
I have saved enough money to retire early
This is a dream of most working professional these days. A huge income at the pinnacle of their career may induce a dream like this. But unfortunately, it remains unfulfilled for most of them. They are finally compelled to change their minds when as they approach their expected retirement age. If you set aside a lot of money thinking that you have saved enough your retirement and decide to retire at the age of 45 years, you are chasing a pipe dream. You probably have not realistically calculated the corpus you would require in order to sustain yourself for the entire period of retirement. Moreover, if you have loans and liabilities, it is absolutely impossible to retire early without paying off all your debts. So, if you are really adamant to pre-pone your retirement, a robust retirement planning from an early age is a must.
Child’s education is more important than retirement planning
The majority of Middle class Indians who refuse to invest in retirement plans are either saving for their child’s marriage or investing for their child’s education. They think that it is not possible for them to afford a pension plan for themselves as they are already invested in a child education plan. Many child education plans are costlier than pension plans. It is true that nowadays higher education has become very expensive. Hence, you need enough money to afford higher studies for your child. But you should also keep this in mind that you can you can borrow for education, but not for retirement. There are different ways to fund your child’s higher education- scholarships, education loan etc. But in order to maintain your standard of living post retirement, it is necessary to invest in a pension plan.
I will spend less after retirement
You may think that your expenses will drop after retirement, but unfortunately, it is a misconception. No matter how determined you are to spend less after retirement, your monthly expenses will increase when you will actually retire. Firstly because inflation will increase the purchase price of commodities. Whatever money you have saved during your employment years will be devalued by inflation again. Moreover, as you grow older, you will be more and more prone to diseases. So your medical expenses will also rise. Besides, there is no source of income for you. Hence, it will be really difficult to control your expenses no matter how much you try.
How to get out of the Misconceptions
The above discussion clearly shows the undeniable importance of retirement planning in our lives. If you want to lead a financially independent life post-retirement, it is important to invest in a retirement plan. The earlier you invest in a pension plan, the larger will be your retirement corpus.
Nowadays, almost all life insurance companies in India sell different types of retirement plans these days- immediate annuity, deferred annuity and so on. An immediate annuity is a type of pension plan in which annuities start as soon as you pay the purchase price. An immediate annuity is a single pay plan. Deferred annuity is a pension plan in which you have to pay your premiums through the policy tenure and you will get the returns as soon as the policy matures. Then there are with-profit and without-profit pension plans. Different types of pension plan have different features and benefits. But the common factor among all these pension plans is that all of them offer the death benefit in case of the sad demise of the policyholder.
HDFC Pension plans- cheaper premiums higher returns
All reputed insurance providers in India offer pension plans in India. Among them, HDFC Life is most popular when it comes to retirement plans. Different types of HDFC pension plans are available in the market these days. An HDFC pension plan offers lower premium rates. So if you want to invest in a retirement plan that offers huge benefits at cheaper rates, it is best to invest in an HDFC pension plan.
Pension plans ensure a steady stream of income throughout your life. So if you want to lead a tension-free financially independent life post retirement, pension plans are the best tax-saving instrument to invest in.