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5 Ways Retirement Plans Can Go Off Track and How To Avoid It

Aug 02, 2018 | 2 years ago | Read Time: 4 minutes | By iKnowledge Team

Saving for your future is one of the key goals of financial security for most people. While we think our job ends as soon as we invest in a retirement plan, the reality is far from that. Small pitfalls can lead to years of financial stability for you and your loved ones, making it key for you to understand and fix these as early as you can.

Spotting these oversights and devising simple ways in which you can overcome them is key to having a comfortable and secure retirement you have always dreamed of:

1. Helping others

One of the main ways your retirement can go off track is if you are constantly providing financial assistance to family members. Helping your children as adults or taking care of aging relatives can place immense financial strain on your retirement plans. Often, we have an emotional attachment to helping our loved ones in times of need, thereby, we end up prioritizing their needs over our financial security.

How to overcome this?

However, when we think emotionally and not realistically we make decisions that are not financially prudent. Even if we started early retirement planning, the long-term impact of helping others will take a toll on your retirement plans and derail your funds. Here a very important factor to remember is that saying no to helping loved ones if you cannot afford it is necessary as while there are alternative ways to help, through loans and more, there is no way to borrow for your retirement.

2. Strain of supporting the household alone

Retirement Plan

Another mistake that can quickly derail your retirement plans and investments is that while most retirement plans work well and provide for your future if both spouses are alive, the reality is that often one spouse will have to spend several years alone due to death of the other. When a spouse passes away not only does an entire source of income stop, but often spending increases as people should be hired around the house to do chores that were performed by them.

How to overcome this?

When assessing your retirement investment options, you need to account for the fact that you will be supporting yourself and your household alone at certain point in your life. Additionally, often widowhood is not the only cause of seniors having to support their household alone. Divorces later in life can also derail your retirement plans and cause immense financial pressure on you to support yourself and pay for retirement. Take this simple factor into account while devising your retirement plan, invest more and you can ensure a financially secure for yourself when you retire.

3. Retiring with debt

Another factor that is likely to derail your retirement plans is carrying a substantial debt burden with you into retirement. It is critical to address loans, mortgages, credit card balances as early as possible so you don’t have to carry the financial strain of these into retirement. Having debt when you go into retirement means that you have increased fixed expenses. While your income during retirement is fixed often problems can be caused by huge unexpected expenses such as medical bills, house maintenance issues and many more, which will cause you immense financial strain if you already have huge fixed expenses.

How to overcome this?

At times being debt free might mean having to downsize your house or other assets, which will ensure you have a secure and comfortable retirement.

4. Failure to account for rising health costs

Medical Expenditure

Health costs are undoubtedly likely to be one of the major expenses during your retirement. Often a key mistake that people make is not accounting for increases in health care costs over the years. Between 2004 and 2014 the average increase for medical expenditure on hospitalisation in India increased by about 176% in urban years as compared to the change in purchasing power parity over the same period, which only increased by 121%.

How to overcome this?

Health care costs have been rising and will continue to rise over the next few years, therefore, making it crucial to understand how much you need to save in the long-run to cover your medical expenses. You can use online calculators such as the Retirement Planning Calculator offered by Aegon Life to estimate the true amount for your retirement and save more from the start.

5. Second home

A lot of times people want to invest into a second home for their retirement, which takes out significantly from your retirement savings. While, most people claim that if needed, they will sell their second house and liquidate the asset, however, the reality of being able to sell your home will vary on a lot of factors including the market climate, thus requiring a huge financial cushion in your retirement plans. 

How to overcome this?

Unless you are sure about having a substantial cushion while saving, you might want to opt to save this huge chunk of your retirement funds into earning interest or capital gains. This way you are more likely to have a secure and stable retirement, by providing a cushion for unexpected expenses.

Advt. no.: IA/Jul 2018/4252


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