The key to joyous existence, post retirement is very much a possibility if your retirement plan is on point. This financial goal is far more important than it appears to be; all for glorious last few years of life. Who wants to spend these golden years penny pinching in uncertainty!
There are many misconceptions which investors necessarily need to stay away from, in order to prevent their retirement corpus from getting ruined.
It all begins with clearly defined goals, writing them down and staying committed to them till the end. Further, it is necessary to review asset allocation, investment performances and total savings regularly.
Another important aspect of retirement is, saving enough. This could be done by redirecting current consumption towards savings, allowing money to compound and grow to provide for a better future. Saving as early and aggressively as you can is beneficial. Retirement savings essentially need time to build, irrespective of the amount. Therefore, every bit of saving counts and goes a long way. Time can be both a friend and a foe when it comes to investing. It is best not to cause delays in coming up with retirement plans. Also, it is advisable to start saving early enough since time is the most valuable asset you can ever have. So, simply do not wait for the right time to come as there is no such thing. Do not procrastinate.
Another mistake to avoid is to time the market. Timing the market is an incredibly foolish thing to do since nobody can control the market for real. You could end up losing a lot of money and even wipe out your entire retirement corpus. It is important to spend more time in the market in order to understand it fully. A panic attack caused by a down day for markets should never be the rationale to pull your investments out immediately. The investor's emotions should not smother or affect their decision making abilities. This should be taken care of; as such decisions can be quite weak and would possibly provide you with nothing in return.
Setting unreasonable benchmarks – should also be avoided. Every investor's portfolio is unique. Hence, its performance cannot be compared with performances of other portfolios. The profits, losses, returns – all are bound to vary. Your investment is successful if it provides you with steady returns and creates stable source of wealth for you in the long term. That's exactly what you were looking for!
Also, a realistic retirement budget plan is a nice thing to have. This also does not get considered most of the times which is a big mistake. Nobody can predict how long their lives are going to be. However, it is safe to be a little too optimistic and save up for a longer lifespan, just in case you end up living longer than you expected. Saving money for the hypothetically extended longevity is always better than battling financial crisis later.
Getting your priorities straight is mandatory. Overspending on unnecessary things or pampering yourself on a regular basis can hamper your retirement corpus. Apart from this, it is important to ensure that you are not quickly laying your hands on pension money without first looking for other options if in urgent need for cash. Do not skip vital tax calculations since you would want to have access to tax effective retirement plans with maximum benefits. Therefore, it would be meaningful to study all your tax requirements well; somewhat easily skipped by a lot of investors.
Many investors on the verge of retirement choose to underestimate health expenses. This mistake should be avoided as well. Untoward events and medical emergencies do not come along with invitations. It is a given that, future medical costs will rise and it should be counted as a part of future income requirements too. Investors must therefore be ready to brave health risks by way of an emergency fund set aside for such hidden, uncalled for health situations.
Neither aggressive investing nor conservative investing is going to help much. However, taking smart, calculated investment risks is the solution here. Being defensive with low or no risk strategies hardly works.
Focus should be on portfolio diversification. This too is conveniently ignored by many investors. A proper asset allocation, indicating investment in different types of instruments in a balanced manner is significant. Making wide investment choices is also required to successfully expand your purchasing power during your retirement days.
Therefore, financial literacy and skills are of paramount importance in order to be wise with your assets. It is safe to stick to straightforward, no-nonsense retirement plans to steer clear of hassles and complications in future. Your retirement security is totally in your hands as a lifetime of savings will essentially be at stake. So the right financial education will set you on the right path which will in turn help you retire happily with greater financial security.