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planning for retirement

What Not to do While Planning for Retirement

by Holistic Leave a Comment | Filed Under: Retirement Planning

According to Sander Levin “Retirement security is often compared to a three-legged stool supported by Social Security, employer-provided pension funds, and private savings.” This may be true in some countries and/or some individuals, but in others, where the social security system is not as robust, or the pension fund and personal savings are not adequate, the stool might topple.

A pragmatic approach to retirement planning can help to avoid certain traps that can prove to be gravely detrimental to the economic status of an individual, post-retirement.

Retiring today is different

Today’s life style is different from what it used to be a few years ago. Work life has also become hectic and stressful so it is often that people look to seek early retirement. While early retirement can relive one of the regular stresses of work life, it means more number of years to live without a regular earning in the form of a steady salary. Building of a large corpus is the key to a contented life after retirement. Being aware of the mistakes that are commonly made while planning for an adequate retirement corpus, will better equip the readers to make wise choices.

Let not thy pension make you feel satisfied

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Pension is paid out of annuities and the rates of annuities hover between 5.5% and 7%. Which is quite low. Moreover annuities are taxable in the hands of the individual who need to pay income tax on them. Pension plans from insurance companies are no different. In all cases annuities are taxable and since they are not linked to the inflation rates, its value remains the same throughout, almost.

So if anyone chooses to stake all his retirement money in annuities, then it is likely that he will end up with low returns and high stress levels.

Insurance policy alone will not serve thou purpose

It is often that insurance agents recommend apparently lucrative policy schemes.However, more often than not, these policies are low return yielding options, with the returns hovering around 5% to 7%.

Other apparent drawbacks of insurance policies are that the premium needs to be paid for long term and the returns are neither large nor immediate. The returns are however tax-free but a corpus evolving out of regular investments over a very long term in a low-yielding product like insurance policy can actually be counter productive.

An example would be a person investing Rs. 10000 per month for 10 years will receive a return of 76 lakhs in 20 years if the rate of return in 10%, however the same money would grow to Rs. 49 lakhs in the same period of time if the yield rate is 6.5%.

This relative inflexibility of life insurance policies makes it a less than ideal choice for investments with respect to retirement planning. Overall, life insurance polices are rigid, low yielding and does not come with any option for opting out and diversification.

FDs’ and other fixed income products shall not grant thou good returns

It is often that people choose to invest in low risk items like FDs’ and other fixed income products in order to minimize their risk to market fluctuations. While this choice might be good for investing a small part of the funds, it will never yield good returns for the investor.

All these options are subject to tax and hence the overall return after tax will be even lower. Individuals, by opting to play safe, lose out on the opportunity to earn greater returns. Moderate to balanced risk investments can help to garner better returns thereby resulting in the creation of a bigger corpus.

Thou will not get guaranteed returns by investing in property

Some people believe that investing in land or property is a fabulous option for making money grow. They dream of buying it cheap and selling it big. However one should remember that there is many a slip between the cup and the lip.

  • There are instances where the property value has nose-dived leaving the investor woefully dejected.
  • Encroachment is one big risk if the property is not regularly monitored.
  • After buying a residential or commercial property one might invest in its décor, renovation and upkeep. However this additional cost is not factored at the time of sale of the property.
  • At the point of sale, taxes also have to be borne by the seller.
  • Property, or any immovable asset, is always difficult to sell because of its inherent illiquid nature.
  • In an emergency when liquid cash is required readily, a property may not come in handy as its sale can take a long time to materialize.
  • For those wanting rental returns from property it can be said that as per current trends rental returns from residential property is about 2-3 % while for commercial property it is pegged around 3-6 % on the prevailing market price.All of this income is taxable.

The consequence is low yields and hence not always justifiableas an investment option at the time of retirement.

Conclusion

Based on the analysis it can be said that people on the verge of retirement or due to retire in the near future would do well to invest in financial assets which offer liquidity, predictability, better returns and taxation benefits. By avoiding the above stated mistakes while planning for retirement one can be safe and happy.

What’s your opinion on these”not to do’s” on planning for retirement? Kindly share your feedback and don’t forget to share this article with your friends if you like it.

If you have any comments or questions, write them in the comment box below.

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Lingesh MMG
Lingesh MMG
20. September, 2023.
Na eppo tha financial goal la enna therunju kitta..enaku full support panna thuku thank you..🥰 friendly nalla pesuninga...
Ravi L
Ravi L
15. August, 2023.
Very knowledgeable and professional team, guided me with the precise financial solutions and timely suggestions.
Hardik Dave
Hardik Dave
5. July, 2023.
Holistic Investment is really nice and trust worthy financial planner. They plan things in realistic manner and also consider future dimensions of items also. They are always available for small or big queries, and also share knowledge and help you become more financial literate, and take right decisions in all financial matters.
Dr. Padmakar Wagh
Dr. Padmakar Wagh
27. June, 2023.
Mr Ramalingam who is the Director of Holistic investments has a excellent financial planning knowledge, the entire Holistic team has been very helpful in my financial planning journey and execution. This is my third year of financial planning with Holistic investments and so far I am satisfied with the progress I have made.
Binamra Dash
Binamra Dash
13. June, 2023.
Very knowledgeable team. Guided me properly with my concerns.
Murugan Bala
Murugan Bala
16. May, 2023.
I have been investing through Holistic for the past 4 years and my experience with them have been really good. The team of Rajan and Ramalingam doing excellent services in meeting my needs through proper guidance on investment options customized. Theya re always available on any specific needs time to time.I would recommend their services to my friends and colleagues too.
Neeraja R K
Neeraja R K
15. May, 2023.
Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
deepika kulkarni
deepika kulkarni
21. April, 2023.
We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
Google rating score: 4.5 of 5,
based on 104 reviews

Google Reviews

Lingesh MMG
Lingesh MMG
20. September, 2023.
Na eppo tha financial goal la enna therunju kitta..enaku full support panna thuku thank you..🥰 friendly nalla pesuninga...
Ravi L
Ravi L
15. August, 2023.
Very knowledgeable and professional team, guided me with the precise financial solutions and timely suggestions.
Hardik Dave
Hardik Dave
5. July, 2023.
Holistic Investment is really nice and trust worthy financial planner. They plan things in realistic manner and also consider future dimensions of items also. They are always available for small or big queries, and also share knowledge and help you become more financial literate, and take right decisions in all financial matters.
Dr. Padmakar Wagh
Dr. Padmakar Wagh
27. June, 2023.
Mr Ramalingam who is the Director of Holistic investments has a excellent financial planning knowledge, the entire Holistic team has been very helpful in my financial planning journey and execution. This is my third year of financial planning with Holistic investments and so far I am satisfied with the progress I have made.
Binamra Dash
Binamra Dash
13. June, 2023.
Very knowledgeable team. Guided me properly with my concerns.
Murugan Bala
Murugan Bala
16. May, 2023.
I have been investing through Holistic for the past 4 years and my experience with them have been really good. The team of Rajan and Ramalingam doing excellent services in meeting my needs through proper guidance on investment options customized. Theya re always available on any specific needs time to time.I would recommend their services to my friends and colleagues too.
Neeraja R K
Neeraja R K
15. May, 2023.
Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
deepika kulkarni
deepika kulkarni
21. April, 2023.
We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
Google rating score: 4.5 of 5,
based on 104 reviews

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