It is said that ignorance is bliss. That may be true in some aspects of life. But it is certainly not the case when you are planning for your retirement. Remaining ignorant about your retirement today can land you in a tight financial position in your twilight years. Outlined below are some of the common mistakes to avoid when you are making your planning plans.
Delaying your retirement planning
When it is about your retirement plans, time plays an important role. Most people keep retirement plans at the lowest level of their financial priority. But retirement planning is a long-term goal that cannot be reached in a year or two. That is why it is crucial to start making retirement plans as early as possible. If you start early enough, your money will have more time to grow. This means you will end up with a larger retirement fund than those who start late.
Not having a roadmap for your retirement
In order to estimate the amount needed for your retirement corpus, you will have to visualize what your retirement looks like. Do you want to spend time pursuing a hobby? How much will pursuing the hobby cost you? Is it your dream to travel around the world? What kind of lifestyle do you plan to lead when you retire? Do you plan to continue working during your retirement? Retirement plans without considering such questions can defeat the purpose of your efforts. So, develop a roadmap for your retirement after considering all such factors.
Not accounting for inflation
Inflation is an undeniable reality that can cost you dearly if you ignore it. In simple terms, inflation means price rise. As time passes, the price of everything is on the rise. So, when you plan for your retirement you will have to calculate how much the price of things will cost you during your retirement years. Based on this calculation, you will have to estimate the money needed to make your retirement life comfortable.
Underestimating tax obligations
Underestimating the impact of taxation can also harm your retirement plans. In order to make the most of your savings and investments, opt for financial vehicles that provide you tax benefits. Saving vehicles like registered retirement savings plan can help you to plan for your retirement and reinvest your tax savings profitably.
Ignoring health care expenses
Not considering medical expenses in your retirement plan can turn out to be a big mistake. With the rising cost of health care, medical expenses can exhaust your savings before you get any chance to do anything about it. So, plan for an emergency fund that will pay for your medical expenses during your retirement years and ensure your peace of mind.
This post has been contributed by SunLife Financial.