Retirement: People make these 8 mistakes in retirement planning! Then later they curse their fate..

Most people think that life after retirement will be easy. Spending time with family, traveling, and fulfilling their hobbies. But the reality is different. Many retired people find that their hard-earned savings are so little that they will not last long.

The savings get exhausted in a major illness, or the money gets stuck due to investing in the wrong product. The result is that the elderly have to struggle to meet their monthly expenses. The good thing is that if the right planning is done in time, then these difficulties can be avoided.

What mistakes do people make?

People make 8 types of mistakes in retirement planning. Let's know about them-

1- Not making a withdrawal plan

After retirement, it is important to decide how much money to withdraw from the savings every year. This is called a withdrawal plan. 1. Withdrawal of 3-4% in the first year, and later on, keeping inflation in mind, you should plan.

If you have ₹2 crore and you withdraw ₹1 lakh per month, then this money will last for about 21 years. But if you start withdrawing ₹1.5 lakh, then it will last only for 13 years. That is, without a withdrawal strategy, you can spend more in the beginning, and in the later years, you may face difficulty in meeting medical and essential expenses.

2- Tying the entire capital in an annuity

An annuity is considered a source of safe income. But its biggest disadvantage is that there is no flexibility in it. The return rate of an annuity is only 5-6%, while inflation is much more than that. Once an annuity is purchased, it cannot be changed. It becomes almost impossible to withdraw money in an emergency.

It would be better to take an annuity for essential expenses like rent, groceries, and invest the rest of the money in flexible instruments like Senior Citizen Savings Scheme (SCSS), mutual funds or debt funds.

3- Keeping distance from equity

Many retired people are afraid of the stock market and invest only in fixed-income products. But inflation reduces the value of savings over time. People above 70 years of age should also invest at least 10-15% of their money in equities with good dividends. Yes, one should not keep too much equity. Keep at least 5-7 years of expenses in a safe place and gradually invest the rest in equity.

4- Depending only on the medical budget

Health inflation in India is 12-14%. That means the cost of treatment is increasing rapidly every year. If you do not have health insurance, then all your savings can be lost to one disease. In such a situation, just keeping a cash reserve is not enough.

It is better to take a basic health plan and a super top-up plan along with it. It is necessary to leave the group insurance provided by the company job and take your own personal plan; otherwise, the policy will be expensive and difficult to get later.

5- Ignoring estate planning
Many people think that Will and Estate Planning are only for the rich. But this is a misconception. If you do not make a nomination or will, then your family may have to face legal problems. To avoid this, prepare the right documents in time.

6- Investing all the money in property

Indian families have a habit of considering property as the safest investment. But after retirement, if most of the money is stuck in real estate, then it can be dangerous. This is because, on one hand, it is difficult to convert property into cash immediately. On the other hand, the maintenance and tax expenses also increase on it. It is not possible to raise money immediately in an emergency. In such a situation, a Reverse Mortgage is a good option, through which you can get money every month without selling the house.

7- Investing in non-tax saving schemes
Fixed Deposit, i.e., FD, is safe, but it can cause a loss in terms of tax. This is because every year the interest on FD is taxable according to your income tax slab. Deep Discount Bonds are better for the long term. These attract less tax and give a higher net return.

8- Taking a loan after retirement
It is a big mistake to retire by taking a loan of Home Loan, Personal Loan or Credit Card. Income reduces after retirement, so you may have to break your savings to pay EMI. At the same time, the burden of debt also gives mental stress. Therefore, try to repay all the loans before retirement.

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