Most Common Challenges People Face During Retirement Planning

17 March 2024 4 min read

“Retirement is a time to enjoy the things you never could before.”

Tropical cruises, international trips, and relaxing at beaches — these are some typical things people dream about for an idyllic retirement. But how many of these middle-aged adults are able to realise it once they reach their ‘golden stage’ of life?

Retirement planning is a daunting task that requires diligent preparation, smart decisions, and proactive steps. Without proper retirement planning, funding your golden years will end up being a pipe dream.

What we mean by proper retirement planning is having enough corpus to lean back and relax, along with sufficient resources to tackle the challenges that life throws at you during the journey of retirement. Speaking of challenges, here are some common ones that you should be aware of to ensure peace of mind while retiring.

Outliving Savings

One of the biggest risks retirees face is the possibility of outliving their retirement savings.

With people living longer than ever, retirement funds need to be robust enough to last 20, 30 years or more. Determining the right amount to save and invest can be incredibly difficult. Working with a Qualified Financial Advisor to analyse expected living expenses, healthcare costs, inflation, social security benefits and other factors is crucial to putting together an adequate nest egg. Retirees also need to be prepared to make adjustments if the market underperforms or unexpected expenses come up.

One effective approach individuals can take for retirement planning involves utilising a retirement calculator.

These calculators can help you to determine the required financial corpus necessary to sustain your desired lifestyle during retirement.

Providing for Healthcare

Healthcare is one of the most significant expenses for retirees in India. While health insurance provides healthcare coverage, there are still out-of-pocket costs for premiums, deductibles, co-pays and services not covered.

Retirees need to factor these potential costs into their financial planning.

No Clear Investing Strategy

Throwing money into your retirement accounts without a solid investing plan leads to poor asset allocation and inadequate returns. This is why it’s important to define an investment mix aligned with your goals and risk tolerance.

Rebalance regularly and adjust your strategy over time.

Professional guidance can be invaluable for creating and implementing an effective plan.

Inflation Estimate

Predicting inflation can be a complex task, making it challenging to anticipate its trajectory over the next 20 years. As a rough estimate, a modest inflation rate of 4-6% is typically considered for developing countries like ours. If your current monthly expenses stand at ₹50,000, it’s reasonable to assume that they may increase by a factor of three to four over the next two decades, especially in a country like India, where inflation tends to fall within the 4-6% range.

The way forward

Retirement planning in India is evolving and facing hurdles like potential healthcare costs, market volatility, and lack of advisor expertise. However, with prudent planning, these challenges can be overcome.

The key is to start saving early, even with small amounts, to take advantage of compounding interest. Stay invested in equities even after retirement to beat inflation.
Use a retirement calculator to estimate the required corpus and contribution amounts.
Build in buffers for healthcare and other contingencies in your calculations.
Diversify across asset classes and rebalance regularly.
Leverage instruments like the NPS and Senior Citizen Savings Scheme for retirement-specific investing.
Seek professional guidance to create holistic and personalised financial planning that aligns with your needs.

Importance of Qualified Advice

There is a well-accepted norm of an insurance agent in our country, but we are not used to the concept of a Qualified Financial advisor.
After taking some advice from friends and relatives, people believe that they planned for retirement, but the role of a Qualified financial advisor in retirement planning is underestimated.
Retirement planning is complex. It involves managing cash flow effectively, understanding taxes, and picking the most suitable insurance and investments.

It’s complicated.

Hence even though your friends and family might have some good tips, it’s often best to work with a qualified financial advisor. They can examine your financial picture and help you make a customised plan. With their expertise, you’ll feel more confident that your retirement savings are on track. Get personalised guidance from a qualified financial advisor. Your future retired self will thank you!

To Wrap up

While family support is still crucial, ultimately you are responsible for your comfortable retirement. With life spans increasing, retirement funds may have to last 30 years or more after stopping work. But with diligence and adaptability, your dreams of relaxing golden years can still come true. The key is beginning early, seeking helpful guidance, and taking proactive steps today to enable the retirement you envision tomorrow.

Please note,

The views in the article /blog are personal and that of the author. The idea is to create awareness and not intended to provide any product recommendations.