Building a decent retirement corpus is not too difficult...
What are the normal retirement mistakes that I am seeing very regularly?
1. Not working to a retirement plan: I am surprised at the large number of people who have no retirement plan. Their refrain is 'we will not live long like our parents'.
Fine, I am sure you plan to die at 65... just in case God has plans for you to die at 95 what will you do about the extra money you will need for another 30 years?
2. Not taking retirement plan seriously: 'Oh I will get by' or 'I am only 35... what is the hurry?' It is impossible to teach financial planning to people who do not understand numbers.
3. Just NOT saving/investing enough: If you are about 40 years of age you need to do a SIP of at least Rs 100,000 a month just FOR RETIREMENT ALONE, and of course pray hard. Stop thinking that retirement plan that you bought from HDFC Life Insurance paying Rs 10,000 per annum is going to be your retirement kitty!! It will probably pay for the breakfast during your retired life.
4. Withdrawing from retirement plans: This is a double whammy. You pay tax at an atrocious rate (you pay tax on the amount withdrawn not JUST on the appreciation. Many people do not know this / do not recognise this mistake / problem.
5. Opting out of Provident Fund if given a choice: Signs of overconfidence that you can manage your corpus yourself?
6. Taking too much risk or taking too little risk: All the money in debt is height of foolishness which can only be matched by putting everything into equities! I see people at both ends of the spectrum. Innumeracy? Fear of the unknown is worse than a shortage of money at retirement?
Illustration: Dominic Xavier/Rediff.com