Retirement should be a celebration of decades of hard work you’ve put and the beginning of a life you’ve always dreamt of. Imagine traveling the world, spending more time with family, or diving into long-forgotten hobbies. But here’s the catch: what if your retirement savings fall far short of your dreams?
Unfortunately, this is a reality for many. The culprit is often mistakes we make during our working years. Retirement planning might seem like an overwhelming task but understanding what not to do can simplify the process. Let’s look at some ways to build a financially secure future.
1. Not Starting Early
A recent survey conducted by Anarock revealed that Gen Z and Millennials barely think about retirement planning. And for those in their 30s and 40s, with work life becoming more stable, the thought might arise: why think about retirement when things have just begun to look better?
The earlier you start, the better it is.
One of the most common mistakes when it comes to retirement planning is delaying when you begin saving. Even those who understand the importance of having a retirement plan often think they have plenty of time to build a corpus and end up postponing it until their 40s or even later. Unfortunately, this delay can cost you dearly due to the compounding effect, a financial phenomenon that rewards time more than anything else.
Let’s break this down with a real-world example:
Case 1: Rohan starts early. Rohan begins investing ₹10,000 per month at the age of 30, earning an annual return of 8%. By the time he turns 60, his retirement corpus grows to a whopping ₹1.5 crore.
Case 2: Priya starts late. Priya delays her savings until she’s 45, investing the same ₹10,000 per month at an 8% annual return. At 60, her corpus stands at only ₹60 lakh.
The difference is huge. Rohan’s fund is more than double Priya’s, simply because he gave his investments more time to grow.
The takeaway? Start early, even if the amount you save seems small. Over time, those contributions will snowball into a substantial fund.
2. Not Saving Enough
Now that you’re convinced about the importance of having a retirement fund, the next question is: how much should you save?
Many people underestimate how much money they’ll need in retirement, leading to a money crisis when they stop working. Factors like inflation, rising healthcare costs, and longer life expectancies mean your expenses during retirement could be significantly higher than you anticipate.
So, how much should you save? Financial experts recommend saving at least 15% of your annual income for retirement, though this figure can vary depending on your goals and lifestyle aspirations. To find out how much you’ll need, ask yourself:
1. Will you live modestly, or do you plan to travel and pursue expensive hobbies?
2. Have you accounted for inflation? What costs ₹1,000 today may cost ₹3,000 in 20 years due to inflation.
3. Are you prepared for rising healthcare expenses as you age?
For example, if you aim to maintain a monthly expenditure of ₹50,000 in today’s terms, you might need a retirement corpus of ₹1.5-2 crore to sustain your lifestyle comfortably for 20-25 years.
3. Not Increasing Savings Over Time
Another common mistake is sticking to the same savings amount for decades. While starting with a fixed amount is a good first step, it’s important to keep increasing your contributions as your income grows.
Let’s say, that at 30, you start saving ₹10,000 a month. Over the years, your income rises due to annual increments, promotions, or job changes. However, you continue saving only ₹10,000 each month. While ₹10,000 might have been sufficient at the beginning, it becomes inadequate as your expenses and inflation-adjusted needs increase. A simple rule of thumb is to increase your savings by 5-10% annually, in line with your salary hikes.
HDFC Life Click 2 Retire can make this easier by allowing you the flexibility in contributions and providing market-linked growth, ensuring your savings keep pace with inflation and your evolving goals.
Here are some of its features:
No entry charges, no policy administration charges and no exit charges.
Start your retirement plan at as low as ₹ 2000 per month.
Maturity age starts as early as 45 years
Death benefits to the nominee which will be higher of the fund value of your policy at the time of death or 105% of total premium paid till then.
The Power of Planning Ahead
Don’t let retirement planning be an afterthought. Achieve the freedom, security, and the ability to enjoy your golden years without compromise.
The sooner you start, the brighter your golden years will be. Your future self will thank you for the effort you put in now. After all, the journey to a stress-free retirement begins with a single step.