Mistakes made during retirement planning can weigh heavily on your golden years. Learn about 5 common mistakes like relying on EPF, starting saving late, and how to avoid them.
Every employed person understands the importance of retirement planning. To ensure financial security in your later years without having to work, a pension plan is essential. While most people plan for retirement, many make significant mistakes that can become burdensome in old age. Today, let’s explore five common errors in retirement planning that people often regret later.
1. Relying too much on EPF
Many young people believe that saving through EPF is enough for their retirement and neglect to explore other options. However, since EPF interest rates are set by the government, it's wise to consider other alternatives, such as the National Pension System (NPS), which may offer better returns. Don’t rely solely on EPF; explore additional retirement plans to ensure a more secure financial future.
2. Not transferring EPF while changing jobs
It's common for people to overlook transferring their EPF balance when switching jobs, leading to a loss of interest. To avoid this, ensure you transfer your EPF funds from your previous employer to your new employer. This way, you can continue to earn interest and maintain a steady growth of your retirement savings.
3. Starting saving late
Many young people believe they can delay retirement savings until later in their careers. However, starting to invest early is crucial for maximizing your retirement funds. The earlier you begin, the more time your money has to grow. To secure a substantial retirement income, it’s important to start investing now and contribute regularly, as this approach requires less monthly investment compared to starting later in life.
4. Considering the retirement age to be 60 years
While the official retirement age is 60, many people face significant stress in their careers, making it challenging to work until then. By starting your retirement planning early, you can build a financial cushion that may allow you to retire before age 60, if desired, or be prepared for an earlier retirement if necessary.
5. Ignoring inflation
Many people saving for retirement overlook the impact of inflation over the next 25-30 years. By investing based on current rates without accounting for inflation, they risk having a pension that may be insufficient to cover their future expenses. It's crucial to factor in inflation when planning for retirement to ensure your savings will be adequate to meet your needs.
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