6 Financial Moves That You Will Regret in Retirement

Written by Vidya Kumar

March 28, 2017

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Executive Summary: Some financial mistakes that we make when we are young can have a negative impact in our retirement years. If you do not save and invest in time or invest in very low risk low return assets, your investments will not be enough to fund retirement. If you do not insure yourself properly, it will hurt your and your loved ones’ finances. You should not spend excessively nor spend all your money on your loved ones but spend after saving and investing appropriately.

1) Delay in Saving and Investing
Save and invest from the time you start earning i.e. usually when are in your 20s. This will enable the magic of compounding to work on your money. It is tempting to splurge money on many things when you are young. You would think there is no harm in starting to save and invest a couple of years later. Let me enjoy life!! This thinking will lead to less money and less returns in the long run. Your wealth may not be enough to fund your retirement years.
Moderation is the key. You should typically keep some amount aside for saving and investing and then spend what is left.
2) Treating insurance as investment
Insurance and Investment are DIFFERENT. Buying insurance to save tax is not investing. It is important to insure your life and your health.
Some people buy ULIPs which offer a combination of investment and insurance with the promise of attractive returns. ULIPs are just expensive products which are not so great for investment.
3) Ignoring term insurance and health insurance
Term insurance is life insurance with no benefits if you survive the term. It is basically insurance for dependents on your income. It will help them deal with financial issues and are not left in a lurch.
Buy health insurance to save money on unexpected illnesses or other issues affecting your health. Insurance policies have regular health check up etc. which are useful in the long run.
4) Taking less risk than possible when younger
Most of us are very conservative when it comes to investing. We invest in FDs and PPF. They are good investment options but cannot always beat inflation. People avoid equity based investments on the premise that they are risky. Yes, equity based investments have a higher element of risk compared to FDs and bonds. But when you are younger, you usually have less obligations and fewer dependents. It is the best time to invest in well-performing equity based mutual funds or balanced funds. Your returns will be better in the long term. Equity as an asset is the best bet to fight inflation. You should have a diversified portfolio with investments in different assets.
5) Spending all your money on your kids
Your children might be your world but that does not mean you end up spending all your money on them. Strive to give them the best of everything but within your means. They have a lifetime to earn, invest and spend money. Plan your finances such that you provide for them and also take care of your requirements. You should not deplete your resources as in your retirement years, you may not be able to earn a regular income. At this time, money invested will give income.
6) Not living within your means
You want the latest Hummer and the iPhone6. There are two new fine dining restaurants that you want to check out. You want to go on an exotic trip. You want all this and more!
It is not smart to spend all your money to keep up with the Joneses. Enjoy your life within the resources you have. Save and invest prudently to have a comfortable life in the future.

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