Personal finance myths that may derail your retirement
While in the retirement phase managing finances can be a hassle. So, there is a flood of advice around right from your friends to family members or your broker or your agent. Taking ideas from too many people can further confuse you. So, it is always a better idea to hire a certified financial planner or retirement planner who would actually chalk down a plan for you and the approach that would suit your requirements. Though there are some personal finance myths which may probably derail your retirement.
Myth #1: Retirement corpus should only lie in cash
It is a fact and one must understand that keeping money in cash form is not going to help you in retirement. The reason for the same is that inflation rises at a rate more than the interest generated by cash. So, it is not a good idea to park all your retirement corpus in cash. Rather, a better way would be to assess your risk profile and create a personalised portfolio which would not only take care of your cashflow requirements but also would help you with planning the financial goals that you may be having for retirement.
Myth #2: Expenses decreases in retirement
We cannot say that expenses decrease in retirement as they do not decrease, rather they get replaced by some other expenses. Though, they would decrease somewhat but not that substantial. The decrease can be anywhere between 15 per cent to 30 per cent. There are various expenses that go up in retirement such as medical expenses. So, assuming that you would require half the amount of expenses in retirement can prove to be a disaster as your cashflow would certainly fall short in retirement. So, assuming a fall of not more than 20 per cent can be an ideal situation.
Myth #3: Having health insurance is enough
First of all, as you grow older health insurance gets costlier. So, relying only on health insurance may not be a good idea. Building a separate medical corpus would help you to reduce your cost on health insurance and also can save you in terms of the time where some of your illness or disease fall under the exclusions or waiting period. So, having a reasonable medical corpus is important and is necessary to build while in the accumulation phase itself.