Top 5 Retirement Investment Myths

Below are Top 5 Retirement Investment Myths:

Myth #1: It’s too early to think about Retirement

If you are still thinking the old way that you will pay the home loan, kid’s education, kid’s marriage and then start saving for your retirement then you have to postpone your retirement by 15 more years. The rocket high inflation,  our increasing wants, new gadgets, buying car every 5-7 years, it is impossible to meet the post Retirement financial requirement if you start late.

Let’s say your current household and other important expenditure is Rs 75,000 per month and you will retire after 20 years. Your monthly expenditure will be Rs. 4,50,687 on the 20th year, if we take average inflation rate as 9%.

You always think that you will start your Retirement investment from your next salary increment, but somehow you can’t. This is because with your salary hike, your expenditure also gets an increment. Again you postpone your Retirement investment and you put your post Retirement finance at risk.

Also you will not get the benefit from power of compounding if you postpone your investing. For example you will be able to accumulate only half of the money if you start just after 5 years than if you start investing now. Check the below example:

Amount Per Month Investment Period (In Years) Investment Period (In Months) Annual Interest Rate Final Amount will be
10000 20 240 15% 1,51,59,550
10000 15 180 15% 67,68,630

“A man who makes a mistake and doesn’t correct it’s making another mistake.”– Confucius

Myth #2: My EPF will take care my Retirement

Your contribution towards the EPF will be till you work full time. Also the contribution is very less (~10% of your basic salary). As the interest rates are going down day by day for small saving schemes, you will find very difficult after Retirement financial life if you are only dependent on your EPF.

Myth #3: My Tax Savings will take care of my Retirement

Tax saving is a small part of your overall investment. Most of the people do last minute tax investments and due to this last minute urgency they invest without having any plan or goal. The good investors are those who make their tax planning from the beginning of the financial year based on their overall financial plan. Since there is a limitation on the amount of money which can be investment for Tax saving, it will not be sufficient for your post Retirement financial requirements.

Myth #4: I can do it on my own, Financial Planners are very expensive

To save a small amount on Financial Planner Fee now, you might miss your important financial goals in future. Certified Financial Planners have the knowledge to provide unbiased advice with proper execution plan for all your financial goals. They also provides the techniques to handle personal financial risks, helps you to fix your existing financial issues etc.

Myth #5: Retirement means Not Working

Most of the people think that Retirement means No Work just relax and enjoy. Are you sure you will be able to spend the entire day without doing anything for another 20 years? Why don’t you do one thing, take 1 week off from your current job and spend the whole week at home without doing anything and see how it goes. Ideal thing will be if you can spend at least 3-4 hours on doing some meaningful work which either gives you an income or helps to the society. This way you will be physically and mentally fit.

“Life can only be understood backwards; but it must be lived forwards.”– Soren Kierkegaard

FYI: Follow these 8 easy steps and achieve your financial freedom.

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