We have seen a lot of tips on how to save for your retirement in the past few articles. It is not that people run away from saving for their retirement or they don’t save at all. It is just that retirement saving is not given the needed priority and people are not aware of the most common mistakes that they do with their retirement savings.
In this article, we will see about some of the common mistakes that people make and how it will affect their retirement.
- Spending like your neighbors
To live within your budget is not always stylish, but it is smart. You can have a wealthy retirement only if you are smart. Rather than upgrading your smartphone quite often or changing your wardrobe on a regular basis or buying a bigger/ new model car every few years is not the opposite of being smart. People usually get influenced by their close friends, relatives or neighbors and try to match to their standard of living rather than being content with what they have. This will leave you with scraps for your retirement.
- Not saving enough money
People don’t have a clear idea of what is required to maintain their standard of living after their retirement. So, they end up not saving enough money for their retirement. If you fail to save enough money now, then you will sure retire poor. Ideally, every month you should be saving 10 to 15 percent of your income to build your retirement corpus. You should increase this amount if you have not accumulated enough funds so far.
- Making the wrong savings priorities
As mentioned before people do save for their retirement, but their priorities are all wrong. Especially with Indian parents, kids’ college and education take more priority than building a sufficient retirement corpus. Parents forget or ignore the fact that their kids can either get a scholarship or an education loan for their studies whereas no such options are available for them to build their retirement fund. Retirement savings should get the top priority.
- Saving money in the wrong accounts
Another common mistake done by people is saving the retirement money in the wrong options. Saving money in a simple savings account or a fixed deposit will not help you build the required corpus. PPF is comparatively a better option than fixed deposit as the returns are slightly higher and also tax-free. However, to achieve your retirement financial goal, you should start exploring other options like mutual funds and be ready to take a little more risk when it is possible.
- Financing everything
Today, retailer markets make it sound very easy to buy everything under the sun by using a payment plan. People, forget that by buying so many things on loan, they waste their money on paying interest rather than allow their money to earn interest by investing it in the right way. So, avoid buying things on EMIs and start to buy things by saving money for them. This way, you can not only live comfortably now but also have enough retirement funds to live on comfortably in the future.
- Being a chicken when it comes to investments
It is a good idea to take some risks and invest your money in mutual fund or stocks (if you are knowledgeable about the market). However, it is a bad idea to put all your money in stocks expecting to get high returns when you just a few years from your retirement. You will end up high and dry in your retirement. But at the same time, be aggressive enough with your investments to ensure that your returns at least overtake the inflation.