Rich Preach - A Financial Liberation Movement

|| Rich Preach || A financial liberation movement

Rich Preach is a compendium of financial awareness. This is an attempt to ignite financial literacy and demystify the tricks of making money. The approach is not a short cut but knowledge driven. The author has tried to keep the vital information crispy and understandable to a common individual.

7 myths of retirement planning

In general, saving for retirement takes less precedence over meeting day-to-day expenses. You should start investing for retirement as soon as possible. You must overcome all of the following myths:

1. Age: Young people (25-35) do not appreciate the idea of planning for retirement. Let us consider an eye opener scenario. Assuming you do not plan to invest for retirement till the age of 35 years. With growing life expectancy, people survive till around 80-85 years of age. You work aggressively till the age of 55-60 years of age. So effectively you have 20-25 years to earn and save for next 20-25 years when you just have to spend. Wake up! The earlier you start investing, the merrier your retirement life would be.

2. Expenses: People assume that they would lead a plain life post retirement. So, the expense would be less compared to working era. Biggest myth! There are several expenses such as medical, gifts for children/ grand children and travel are not accounted for.

3. Inflation vs fixed returns: People tend to forget that inflation might eat-up all the returns if it is kept in fixed return schemes. Due to inflation, purchasing power diminishes. Offset this! Before it is too late.

4. Children: There is a natural tendency to depend on children post retirement. Don’t forget! In today’s nucleus family system, your wishful thinking may disappoint you. If your children can take care, let that be bonus for you. But do not count on that factor.

5. Equities: People feel stock market is very risky avenue to tackle as it rises and falls irrationally. But, if you look at historical data equities in BSE Sensex give a compounded return of about 20% per annum. Whereas, FDs around 9%! Equities are best inflation busters. It is observed that when inflation rises, share prices also rise.

6. Bank deposits: Many a times, people feel that bank deposits are adequate to survive throughout the retirement. Again, they forget inflation factor and do not realize that their fund might diminish with diminishing purchasing power of the currency.

7. Earning: Last but not the least, retirement planning is not that scary. You do not need a huge sum if you start early to put in retirement fund. You just have to save a little extra. Trust me! Only a little extra for a relaxed retirement life.