If you are close to retirement, there are some things you should not do.
That comes as a surprise, right?
You thought you already knew everything about saving up for retirement, and then finally doing it, knowing you have enough savings. You think you have left no stones unturned in making your personal finance for post-retirement life secure.
However, you still may be making these major mistakes. You have beliefs which had worked for you before, and you do not want to change them. However, new times and circumstances require a change of beliefs.
But don’t worry. Many people make these mistakes. In this article, you’ll learn which problem you are facing, and how you can solve it.
Having a closed mindset: You have been investing for decades. You have seen your share of victories and losses. That bad news is that you are still holding on to the same old beliefs and strategies which worked in the past. Having such anchor bias is not right. For some people, they do not wish to have an investment plan and complain why they can’t time the markets. They hire consultants but do not listen to their advice. Such people only listen to someone who confirms their old beliefs. Some people do not even wish to hire a financial planner nor invest in mutual funds, while others do not wish to pay fund management charges.
Focusing on just one area of your financial life: Here’s a common issue that people face. They pay attention to stock trading, but not to allocating resources to FDs. Without doing so, how can one beat inflation?
Depending on employment after retirement: When you are nearing your retirement age, the focus needs to be on generating regular income, which you can use to meet your expenses after retirement. People mistakenly think that employment income shall be regular. But that is not so, as it is not assured. It is better to think about Systemic Withdrawal Plans for short-term debt funds.
Risks of “guaranteed” products: Investors tend to think that products like bonds, non-convertible debentures, jewelry schemes and company deposits have guaranteed returns. The truth is that all of these have risks, and that means that these instruments can also default on payments, and concentration risks. You can therefore lose your whole investment in case of defaults. Post-tax risk adjusted monetary returns are not very good. Additionally, there is low liquidity.
Waiting for retirement to start planning: It is never too early to start planning. In fact, the sooner you start planning, the better off you’ll be. It may happen that you retire in midst of a bear market when your retirement savings value is 30% lower than what you expected. It is far better to redeem your equity holdings a few years before your retirement. You can then move these into debt products to protect your hard-earned wealth from scary market drops.
Relying on employer health plans: A better thing to do is to have health covers early on. At the latest, you should have health cover from the age of 50. If you do this, you will not have to buy expensive plans later after you retire.
Taking loans after retirement: This is a strict no-no. Instead, use your assets to meet your financial obligations. After you retire, it is generally not a good idea to take marriage loans, gold loans, loans against property and the like.
If your financial plan for retirement is good enough, you won’t need a bail-out plan!