Thursday 20 April 2017

5 Retirement Planning Myths

5 Retirement Planning Myths Debunked


How would you feel if you have to live without a salary for 20 years or more ? To be precise, that's what retirement is all about!!!

Majority of Indian Middle class fall in below category 
a) When young and newly married -Attitude is Who cares for retirement
b) Married with children - Already paying an EMI for Home Loan & Car Loan (you should read Mutual Funds Vs Real Estate , if you married with children and planning to buy a house)
c) When Children Graduate - Home loan is completed and Education Loan started (read Child Education Planning)
d) When Children Marry - Loan for Marriage 
Finally when retirement comes, mostly dependent on children




Middle class life entire life goes in debt but will never take the risk of investing in stocks or mutual funds.
I am sorry if i am hurting your feelings but above is truth based on what i have interacted with so many senior citizens whom i met every morning in joggers park near my house.

Must Read : How Much Insurance Do You Need?

Usually, In India, people expect their children to look after them or presume that their EPF corpus will suffice for their retirement expenses (if not redeemed for any of the loan above). But if you calculate the approximate money needed to lead a stress free life, retired life you will realize why planning for your retirement is as important as planning for your other life goals.

Similarly, While you have been planning for your retirement, you may have also believed some of the retirement planning myths that are branded about.
Hence, Whether you are about to start planning your retirement or have already started it, about to retire or have already retired, this article is for you.

Myth #1 : Retirement is a lifelong process

Retirement is usually treated as long holiday.But that is exactly what it is not.
Is it possible to be on a holiday for 20 years of your life? Certain retirees often experiences alienation during their retirement period as their role as a worker is over.They do not feel productive and feel disengaged from their lives. some look for support in their communities or try to find some work to feel productive.Hence,  
retirement is not a long holiday for rest of your life 

Must Read : Why you should not buy ULIP

Myth # 2 : You save and invest when you earn and spend when you retire

While it is true that you are encouraged to keep savings and investing for your retirement, that is simply so that you can be relatively free of financial burden during retirement years. 
But does this imply that you only keep spending during retirement? Hardly. Even in your retired life, you have a long future to consider,bills to pay and expenses to meet. You may have a corpus hefty enough to meet your needs for next 20 years or so but can you say for sure you will be able to meet all unplanned expenses as well? 

If saving money is your habit you have developed all your life, there is no reason to stop it the moment you retire. If you have a substantial retirement corpus, you will not be using the entire corpus at one go. Hence, keep a part of it investing ensuring that your funds are not lying idle. If you also generate supplementary income by doing some part time or consulting work or have rented out a property, income coming fro these streams are added to your corpus. Hence, you need to work out a plan for investing this regular income too. 

In Short, just because you have stopped working does not mean your money should also stop.

Myth # 3 : I don't plan to retire, so no need to save

Every coin has two sides, Because of technology you are reading this article and the same technology had made many jobs obsolete.
By the time you retire, the work you do may become obsolete. Hence, finding work suitable to your skill sets could be challenging, especially if companies are looking to hire young guns. Instead of relying on your continued work, rely on your present income to generate future income. 

The future might be uncertain, but as the saying goes "precaution is better then cure", present is also uncertain. Your salary comes in every month might be getting a yearly bonus and salary increment as well. Start your savings and investments for retirement. Do not give yourself the illusion that you can be frivolous today and keep working because you anyway do not plan to retire.

Must Read : What if your Insurance company goes bankrupt?

Myth # 4 : You should exit equities at retirement.
One of the biggest myth surrounding retirement planning is that your corpus should not be invested in equities or equity oriented mutual funds. These misconception have led people believe equities are unsafe and volatile.
Equities as an asset class have given the highest return over the long term. The long term period reduces volatility and also increases returns. Hence if you are planning to start investing for your retirement, equities should be your priority as you benefit from the time value of money and the power of compounding.

Myth # 5 : You should repay loans before you start savings for retirement.
A lot of us tend to believe that since goal of retirement is far away, we can start planning for it much later. This is a costly mistake. If you start early, you can start small and reduce the financial burden later on. 
Many investors prioritize repayment of loans before starting their plan for retirement. They tend to treat retirement planning as secondary goal compared to repayment of debts.

At this stage, you have to remember that a person who cannot help himself is no good for others. Hence, break the myth of "Shall plan retirement later" or in Typical hindi "Dekha Jayega" and start doing so now, along with your various debt repayments.

Must Read : Why term insurance is required up till 60 years?

Conclusion 
Retirement is that one goal for which you have a plan. For every other goal, you have the option of taking a loan and repaying with your future income. Retirement does not allow you that luxury. You have to make the best with what you have saved and invested. 
Hence, do not fall for these myths and set up hurdles in your retirement planning process.

PPS: If you think this page and blog will be useful to any of your friends please spread the word. A good way to start is to share this page on your social circle using floating social share bar on the left. 🙂

About the author
Vipul is a software sales professional for Asset Management Companies, Pension Fund and Stock Brokers from last 16 years. 

Vipul believes that the amount of financial information flowing our way is probably 10 times more than what it used to be 15 to 20 years back due to the advent of newer forms of communication.
All this information is creating an information overload in the minds of individuals resulting in analysis paralysis and he helps them select the right decision while creating a Goal based financial plan.
In case if you need a Financial Plan please connect to him on vipuls1979@gmail.com


Wednesday 19 April 2017

4 Things Not To Do Until Your Home Loan is Sanctioned

If you are planning to buy a home and think that your home loan application can easily get accepted by the bank, think again. While a good income is certainly a criterion for lending, a bank takes into consideration a whole lot of other things too before deciding to lend. However, some silliness on your part before making the first move can derail the most important goal of your life.



Must read : Mutual Funds vs Real Estate

Buying a home is everybody’s dream. And a variety of finance options make us believe that realizing this dream into reality is not that difficult. But it’s not easy either. The first step towards the same is getting the loan sanctioned. And this includes certain behaviors’ of yours before you apply for the loan. Take a look at the things you should not do till the mortgage you want gets closed down.
 
Do not change job
 

While the offer of a new job is enticing, you should refrain from job hopping when you have to apply for mortgage few months down the line. Frequent change of jobs is viewed suspiciously by lenders as it implies job instability.
Your mortgage request can be rejected on account of this as lender places a high value on the latter. You need to be employed at one place for certain time duration in order
to be eligible for the home loan. This period can range anywhere from one to three years.


Must read : Retirement Planning : Beating Inflation blues 

You should not take your address lightly
You should not change your residence between the time of applying for the loan and till the same is sanctioned. This is because the address that you mentioned in the loan application form would be investigated by the lender during Contact Point Verification (CPV) check. If your CPV check is negative, that is if you are not available at the residence mentioned by you, the loan application can be rejected. 



Do not close an old loan account 
While it is a known fact that a bad credit behavior hurts your CIBIL score, you must also know that some good credit behaviors can also have a negative impact on it. And closing one of your old credit card accounts, especially if it has a clean repayment track record, is one of them. This is because the length of the credit history is an important factor in determining your CIBIL score. The longer it is, the better it is. So you should avoid closing any credit account before applying for a home mortgage.

Must read : Mutual Funds vs ULIP

Avoid taking another line of credit 
If you have to apply for a home loan in few months time, drop the idea of adding another line of credit. In calculation of your home loan eligibility, your existing lines of credits are also taken into account.
Suppose you want a loan of Rs 25 lakh on which home loan EMI works out to be Rs 25,000. But if you had taken a personal loan sometime back towards which you are paying Rs 10,000 as EMI, then as per fixed obligation to income ratio the reworked EMI for the home loan would be only Rs 15,000.
Accordingly, your home loan eligibility would be reset.
If you pay heed to the above mentioned points, closing your home loan mortgage will be a smooth sailing process.


PPS: If you think this page and blog will be useful to any of your friends please spread the word. A good way to start is to share this page on your social circle using floating social share bar on the left. 🙂

About the author
Vipul is a software professional developing software for AMC, Pension Fund and Stock Brokers from last 16 years. 

Vipul believes that the amount of financial information flowing our way is probably 10 times more than what it used to be 15 to 20 years back due to the advent of newer forms of communication.
All this information is creating an information overload in the minds of individuals in taking decision and he helps them select the right decision while creating a Goal based financial plan.
In case if you need a Financial Plan please connect to him on vipuls1979@gmail.com

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