Five retirement planning myths

Growing nuclear families, increased lifestyle expenses, and mortality has pushed Indians to act on Retirement Planning as they intend to create a corpus that will be sufficient to meet their needs during their graying years.

Feb 24, 2015 01:02 IST India Infoline News Service

Growing nuclear families, increased lifestyle expenses, and mortality has pushed Indians to act on Retirement Planning as they intend to create a corpus that will be sufficient to meet their needs during their graying years. But still there are some ideologies that become a barrier preventing people to execute their plan.
 
Why take health plan when employer is giving: Young individuals shy away from taking a separate health plan as they feel that an employer provided health coverage is sufficient. The thought process is wrong as health insurance becomes expensive as the time passes. A health plan opted in late 50s will eat up savings, therefore sooner is better.
 
Too early to think about retirement: A person may feel that saving in their 20s towards retirement is just too early, and they have 40 odd years to worry about it. However, people fail to understand that starting early translates into more savings and less burden afterwards. The magic of compounding could stun two individuals who have started investing with a ten years gap. An early saver at the age of 25 might amass Rs. 55 lakhs as retirement corpus by investing Rs. 1000 per month at the rate of 12%. On the other hand, a person starting the same amount of investment at the age of 35 will only accumulate Rs. 17 lakhs at age 60.
 
Inheritance will take care: A lot of individuals are dependent on their inherited wealth for retirement survival. But, solely depending on inherited assets will leave nothing for future generation then, and one must prepare for retirement so that they have room to accommodate urgent needs.
 
Working till age 60 might not be possible: People assume that they will work until age 60-65 and plan accordingly. But in most cases one has to withdraw from their office duties due to unforeseen circumstances such as health or other personal issues.
 
EPF/PPF not sufficient: People often assume that their amount invested in EPF/PPF is sufficient for the retirement saving purpose. But it is a myth that EPF/PPF accumulations are good enough as the investments are not aligned with the inflation and rate of lifestyle changes.

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