Most people view retirement as an event that is still too far off in the future to be concerned. As true as that might be, taking time for granted can be a mistake, especially when it comes to managing your finances for retirement planning.
One of the biggest regrets retired individuals have is not saving enough for their golden years and having to depend on their children for the rest of their lives. A thumb rule when planning for retirement is to start planning as soon as possible to accumulate a substantial amount without stressing yourself out. The best retirement plans are the ones that consider inflation, taxation and life expectancy while starting as soon as possible to gather the correct retirement corpus. Amongst other lucrative retirement plans, investing in a monthly income plan is a great option to consider.
This article will take you through the importance of planning for your retirement with a monthly income scheme and the benefits of investing in monthly income plans in India.
Top 5 mistakes to avoid in retirement financial planning
Mentioned below is the list of the top five mistakes most individuals make while planning for their retirement and how you can avoid making the same mistakes.
● Not starting early:
Saving up for retirement takes much longer than one would expect. With an early retirement plan, it becomes easier for you to build a sizable corpus. The best retirement plan is built on the power of compounding; thus, time is of the essence here. Regardless of the insurance policy you choose, with age, the premium amount increases. By starting early, not only are you quoted a lower premium rate, but it also empowers you to invest more, leading to maximized returns.
● Not taking inflation into account:
The average rate of inflation in India has been about 6% in the last decade. If you are calculating your retirement corpus without accounting for inflation, you will run out of your retirement fund much faster than expected. For example, if it takes ₹1 lakh to run your household expenses in the current year, in about 20 years, the same standard of living would need at least ₹3.2 lakh per month.
● Not calculating the correct retirement corpus amount:
Miscalculation of the required retirement fund is a common mistake people make. This miscalculation can lead them to either not have a sufficient corpus amount at the time of retirement to live their remaining years comfortably, or worse, having to fall back on their children for financial support. Many financial sites offer retirement fund calculators that can help you reach a ballpark figure. For more details, it would be ideal to work with a dedicated financial advisor.
● Not accounting for taxation:
A hidden factor that takes most people by surprise at the time of their retirement is taxation. Tax slowly eats into your retirement savings and can cause a substantial deficit if it is not accounted for at the time of setting the final corpus amount goal. It is suggested that you invest in monthly income plans in India that offer the maximum tax benefits to balance the negating taxation effect.
● Not considering life expectancy and health cost:
As they say, life is unpredictable. To tackle their unexpected passing, people usually invest in life insurance. However, no one considers accounting for living beyond a certain age after retirement. If you have accounted for living up to the age of 80 years, after retiring at 60 years of age but end up with a longer life, you will fall short of funds to support yourself. It is suggested that you add at least five years to your expected life expectancy and keep monitoring your required corpus amount, and makes the necessary changes in your spending patterns if needed.
Another factor most individuals overlook is the sudden increase in cost for health care post-retirement. While you may be a healthy individual, leading an ideal lifestyle, no one can determine if you will face any health problems due to advanced age or not. More often than not, there are chances that you or your spouse may have to deal with unexpected age-related health issues. Health care can leave a deep impact on your savings, which is why it is an important factor to consider while saving up for your retirement fund.
How to Plan Retirement to Achieve Financial Freedom?
Having gone through the mistakes that can be avoided while making a retirement plan in India, you should also consider the financial assets that can assist you in leading a comfortable and financially secured retirement. One such financial tool is the monthly income scheme.
The monthly income scheme is an ideal investment for individuals looking to receive a scheduled return on their investment to be able to live comfortably, even after losing the income from their regular jobs. Monthly income plans are known to provide their subscribers with a return between 11% and 14%, which can help them tackle the inflation rate and still help make a profit out of their investments. Since monthly saving schemes are divided into a ratio of 20:80 between equity and debt markets, they are considered a risk-free investment.
Safe investment option with Edelweiss Tokio Life Active Income
The Active Income Plan is a guaranteed returns monthly income plan by Edelweiss Tokio Life. It provides its subscribers with a guaranteed income that starts in the 2nd year and continues to pay the policyholder until the age of 99. To add to the benefits, it provides the user with life insurance, to which you can add riders to enhance the protection provided. The premiums paid under this plan also provide you with tax deduction under Section 80C and the maturity payouts, as well as death benefits, are tax-exempt under Section 10(10D).
Not understanding that retirement is imminent and putting off planning for your golden years is a mistake made by most. The Edelweiss Tokio Guaranteed Income Plan is an optimum retirement plan in India that can help you achieve a stable income in your hay days and allow you to lead a comfortable and independent life.
Aastha Mestry - Portfolio Manager
An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.