Many of us are busy with our lives and we often tend to chase our near term goals, compromising our future needs. For many of us, retirement is not an overriding priority. In this article, we list down the common myths about retirement. Dispelling these myths will help advisors deal with this topic with clients more effectively.
My family will help me during my retirement phase
Many elderly people generally tend to depend on their children financially. While children do have a responsibility to look after their parents emotionally and financially, it is advisable for every individual not be overly dependent on their family members, especially during retirement. “Retirement is not a priority for many of us. Since parents do so much for their children, they expect that their kids will take care of them during retirement. But they should not be overly dependent on their family members,” says Hemant Rustagi of Wiseinvest Advisors.
I’m young I don’t need to plan for retirement so early
Planning for retirement may be the last thing in the minds of youngsters who have just started their career. This is understandable as they are in the early stages of their career and have other priorities. We all know the benefit of starting early. The more early your clients start saving for their retirement the better for their future.
I’ll start building a nest egg few years before my retirement
Many of us don’t give serious attention to our long term goals, retirement being one of them. Postponing saving for retirement till later means that your clients will have to set aside much larger sums to build their retirement nest egg. So the earlier you start the better it is for you and your clients.
My retirement period will be short and I’ll cut down my expenditure
With increasing life expectancy and medical advancements, the life expectancy has gone up. So suppose your client retires at 60, he/she can expect to live at least for 20 more years. Thus, advisors need to make sure their clients have a sizeable corpus to enjoy their retirement. “People tend to think that they will curtail their expenditure during retirement. However, once people are used to a certain lifestyle it becomes difficult to adopt austerity. Considering inflation in mind, the cost of living actually goes up dramatically during retirement, “says Suresh Sadagopan of Ladder7 Financial Advisories.
While some may cut down on their expenditure post retirement others may actually end up spending more in the initial years after they retire. This is true because during working years, your clients have less time for leisure and other activities. When people have more time at their disposal, they tend to engage in new hobbies, travel more or invest in a luxury to fulfil their dreams/aspirations. Also, medical expenses can blow up during the post-retirement phase. “People believe that they don’t need Rs. 5 crore or Rs. 10 crore for their retirement. They often say what I will do with such a huge sum. The value of a crore would not be the same 30 years down the line. Thus, people need to save a lot for their retirement,” adds Suresh.
My pension will take care of my retirement
This is a common myth that your clients have. They have get pension, gratuity and other savings but that may not suffice. As a measure of caution, Suresh advices that people need to save for retirement even if they have pension and other savings.
I need to invest in safe or guaranteed investments during retirement
While it is advisable to keep a portion of your clients savings in safe instruments, one should not avoid equity altogether. “The life expectancy has increased. If people can survive for 30 years post retirement, then equity is the only asset class which can accumulate wealth for people,” observes Suresh.
Have you come across any myths harbored by your clients? Do share with us.
