While retirement planning is on everyone’s to-do list, it is often delayed or procrastinated. Some people begin planning their retirement in their 20s but most people don’t start thinking about it till they are in their 40s.Experts advise that individuals should begin planning their retirement early as soon as they get their first stable income. Parents also encourage kids to start Systematic Investment Plans (SIPs) in order to instill good and healthy financial habits. However juggling SIPs, work schedules and budget planning, some important lessons are often forgotten or remain unlearned. This in turn can lead to investors making mistakes when it comes to retirement planning.

Here are three mistakes every individual should avoid while planning for retirement:

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Not Starting Early

Retirement planning’s first rule is not how much you need to save but when you should start saving. Many people start retirement planning in their 30s or 40s which can lead to an inadequate corpus as the compounding period is smaller compared to those who start in their 20s. The delay may be caused by a plethora of reasons such as being burdened by responsibilities like earning for the family, paying for insurance, getting a new house, a bigger car and other such expenses.

Financial experts recommend that you should start retirement planning in your 20s, as you will get better compounding benefits, more profit, better financial discipline and the ability to take more risks. Additionally, if you start early, you have the power to think more clearly than in your 40s.

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Not Factoring In Inflation

An investor earns money to save it, invest it and multiply it. As inflation is always rising, It affects your purchasing power directly. Often people neglect the importance of inflation adjustment in estimating the size of their retirement corpus. This negligence is a significant mistake that leads to insufficient funds, lower purchasing power, strict budget cuts and may even result in needing to work after retirement. 

An adequate corpus can be raised based on estimations made for the future. Anticipating future expenses and adjusting it with the current value of money will not only lead to a series of errors but also lead to financial shortcomings in your old age leading to reduced purchasing power. Thus it is advised that you factor in inflation while planning your retirement.  Delhi, Bengaluru’s Young High Earners Drive Term Insurance Boom

Not Reviewing Your Portfolio Periodically

Many investors set their mind on one figure and invest their money to achieve that amount, when life events are added to the mix, the size of the corpus reduces. Often the estimated size of the corpus required for retirement changes based on major life events such as marriage, birth of children or any other major development.  These events increase the financial requirements of your day-to-day life.  Failing to review your portfolio periodically to factor in such major life events can result in a lower retirement corpus than the amount you may actually need for retirement.

Periodically reviewing your portfolio helps in noticing the added expenses based on life events which can help in providing a clear image of what your retired life will look like. These major life events are a reminder that you need to add extra expenses to your retirement planning and revise your retirement plan.

Investors should adjust the added expenses, and increase their savings in order to get a bigger corpus. Additionally, conducting an insurance review can also save you from a financial crunch in emergencies. To avoid such mistakes it is advised to revise and even change the insurance policy if required according to the needs of your family members. Reviewing Life Insurance Plan; Know Why It's Important After Major Life Events