Retirement & Financial PlanningAug 25, 2015•4 min read
5 Common Mistakes People Make When Planning for Retirement
From skipping a retirement road map to underestimating healthcare costs, these are the pitfalls that derail retirement plans — and how to avoid them.
Tejas Shah
Proprietor of Silicon One and Silicon Systems, AMFI-registered Mutual Fund Distributor since 2004, based in Vadodara.
What you do today determines how smoothly you handle retirement. Dreaming about it is the first step; planning and working toward it is what actually gets you there.
No road map, and not knowing your number
Without a clear picture of the retired lifestyle you want — travel, medical needs, family commitments — it's hard to know how much to save. A real example: one investor at 55, planning to retire at 60 with Rs. 50 lakh saved, actually needed roughly Rs. 3 crore to maintain his lifestyle — a shortfall discovered far too late to fully close.
Starting late, and ignoring healthcare costs
Two investors both put away Rs. 10,000/year: one started at 25 and stopped at 35; the other started at 35 and continued to 65. Despite investing for a third of the time, the early starter ended up with roughly 2.5 times more, thanks to compounding. Separately, medical expenses are the most common retirement contingency — a single major medical bill can exhaust savings without a dedicated emergency and insurance buffer.
Not making smart investment choices
A 9% bank FD looks inflation-beating on paper, but after tax at a 30% bracket the real return falls to a little over 6% — below inflation. Assets like equity mutual funds, which can deliver 14–16% after tax over the long term, help close the gap and reduce how much needs to be saved each month.
Knowing where you want to end up is the first step to knowing what you need to do today to get there.
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