Many people retire each day with dreams of the future. Unfortunately, many retirees may encounter hardships that could have been avoided.
No one can predict your future health conditions, financial markets, tax rates and so forth. But, with a plan, you can avoid some of the following problems:
1. Retiring much later than they could have
One of the common mistakes is the belief that one must work until a specific age or accumulate a certain amount of savings. Much of this is rooted in oversimplified financial planning. I recommend individuals to work with a retirement professional who can help them run their numbers and create a retirement plan while providing guidance on how to navigate the complexities of retirement and beyond.
2. Boredom is a big killer
Husband and wife may not die together. So, one has to be prepared for a long, lonely life. Many individuals underestimate the void that retirement and bereavement can create in their lives. Build good relationships with fellow runners, cyclists, musicians, schoolmates, college friends, etc. Ensure you surround yourself with many different individuals with different backgrounds and age - who can help fulfil your emotional, physical, spiritual and intellectual needs.
3. Lack of purpose
Everyone needs a purpose in life. Whether it is to pursue hobbies, start a new business or learn a new language, or devote your time to a meaningful cause, having a sense of purpose will keep you motivated, positive and eager to embrace each day's opportunities.
4. What if I run out of money?
The fear of finishing all your money makes people live in fear. This can create unnecessary budget constraints and concerns. Building a retirement plan that gives you the confidence to enjoy your early retirement years while you’re still energetic and healthy should be the goal.
5. Worrying too much about market mayhem
If you use the ‘Bucket theory’ for withdrawing money for your day-to-day expenses any mayhem in the market should not worry you too much.
Buying annuities say 3 times – once at 67, once at 77 and once at 85 may be a good idea.
6. Medical-related financial hardships
Medical and health care costs could be much higher than anticipated in retirement planning. The spouse handling the money may have to take sub-optimal decisions!
Some medical insurance and some self-insurance combination works best.
7. Making a Will and managing legacies
Communicating well with your children -over and above making your will – and explaining it to the family is a great way to keep the family together.
8. Don’t obsess with saving tax
The tax limit is Rs. 12L -which means that a couple having expenses of less than Rs. 24L can technically be comfortable and tax free! Still, knowing tax planning is useful, do it well.
9. Supporting capable children
Just like they say on airplanes, “If your oxygen mask is deployed, wear yours before you help others”. Ditto for your kids. Support them for causes like buying a house of their children’s education. Prioritize your own financial well-being before offering support to your children.
Start early, go to a planner, and have a great time.