Avoid these Mistakes for a Wealthy Retirement
For a cash-rich retirement, all one has to do is avoid these simple, yet costly mistakes.
1. Overdependence on EPF
2. Not transferring EPF on changing jobs
3. Starting to save later
4. Not choosing the right asset class
5. Considering 60 as universal retirement age
6. Not planning for early retirement
7. Ignoring inflation
- Overdependence on EPF:
Employees Provident Fund(EPF) grows at a conservative annual rate of 8%. To create a sizeable corpus, the growth rate has to take care of inflation too over the long-term. Relying entirely on EPF, therefore, may not be a good idea.
- Not transferring EPF on changing Jobs:
Thanks to Universal Account Number (UAN), the process of EPF transfer has become relatively easier. So avoid withdrawing you EPF amount and instead, as and when you switch jobs, transfer it online and let the power of compounding help you towards saving for retirement.
- Starting to Save Later:
Procrastination is the biggest enemy of creating a decent long-term corpus. Just remember that if you start saving early, the money required to save for retirement will be much less than the amount you will need to save if you start (saving) at a later age.
- Not choosing the right Asset Class:
Equities have the potential to deliver higher inflation-adjusted real return than any other asset class, including gold, debt or real estate, over the long-term. But as one nears retirement, debt, being less volatile, helps in preserving the capital so one should start shifting funds from equity to debt assets.
- Considering 60 as Universal Retirement Age:
As a result of an increase in life expectancy, economic pressure and also the desire to keep oneself busy for few more years post-retirement, it is becoming difficult to retire at the age of 60. But not all would ideally want to carry on if there is a decent corpus for retirement.
- Not planning for Early Retirement:
Although life expectancy is on the upswing, the case for an early retirement, even though there is no study to back it, seems to be picking up steam. For early retirement, one has to have accumulated a big enough corpus so that one does not need to depend on active income anymore.
- Ignoring Inflation:
Youngsters may not have estimated their retirement corpus requirement based on actual numbers. They need to ideally save by not taking current costs into consideration. Remember, after 15 years at 5 per cent inflation rate, Rs 1 crore will fetch you goods and services worth only about Rs 48 lakh!.
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