Pension Plans

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Myths of Retirement

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You love it or hate it retirement is a phase which most of us need to go through. There are mixed feelings that people get when they think about their retirement. At times people feel excited about having all the leisure time which they can spend the way they want and when people are not in the best of their moods they get concerned whether or not their health and finance would be in the best of shape to support their retirement plans. People try to envisage the future and there are some myths that we see a lot many people seem to develop about their retirement. Let us discuss a few myths which are more common.

Myth #1: My retirement expenses would be a lot less than what they are now

This is a complete misnomer. Expense always remain unpredictable and they can come from any corner and at a time when you least expect them. While you are young you have a family to support and hence expenses tend to be higher is what most people believe. But when you retire your personal needs are much more than they are when you are young. Most retired people are on some medications and hence health expenses tend to go up. Besides, if you want to maintain the same comfort level you will also need to hire an employee who could help you in daily chores. And, when you have all the free time in the world you want to spend it well so you will need to spend more on travel and entertainment.

Myth #2: It is too early to plan about retirement. I can do it when retirement is just a few years away

You would never ever dare to think like this if you take some time out and think about how much retirement corpus would be adequate to help you live a life that is at least of the same quality as preretirement life. If you are 30 years away from retirement and need INR 40,000 monthly for your living expenses today, when you reach retirement your monthly expenses would have gone up almost 4 times assuming an Inflation rate of 5 percent. So just imagine the retirement corpus you would need to build to generate a monthly Pension income of INR 1.6 lakh. Assuming an Annuity rate of 8 percent the retirement corpus would have to be somewhere close to 2.5 crores. Do you still think this is achievable with just a few years of savings!

Myth #3: My friends and family will take care of my retirement needs

This is easier said than done. It would be unfair to neglect the changing scenario wherein children have become more career oriented and they do not want to be constrained by responsibilities related to taking care of their parents back at home. Nuclear family is the cult today and the trend is only getting stronger. Being financially dependent will also rob you of your dignity and freedom to spend time and money as you would ideally want to. I would say, friends and family will always help but this should always be the last resort and smart retirement planning your goal.

Myth #4: I have my pension plan or retirement plant to take care of my retirement

Just investing in a retirement plan or a pension plan is no guarantee that your retirement corpus would be adequate to take care of all your financial needs in retirement. It is also important that you start investing in a retirement plan as early as possible and also invest as much that is required. Besides, a pension scheme it is also recommended that people also own a health plan separately so that the extraordinary expenses related to medical illness is funded by the health Insurer and not your retirement corpus which is limited and finite.