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Why are your early retirement plans failing?

Why are your early retirement plans failing

No matter what job you are in and how happy you are there, we all crave for retirement days when you will have the time of your life to laze around and just chill.

Don’t you wish for a time when you will not have to compete for that next month’s raise? Or burn the midnight oil for meeting the presentation’s deadlines? Isn’t retirement the ultimate dream?

Although retirement is the ultimate dream that we think of saving and investing for, how many of us actually plan for it? Trust me, the number is very low.

But why is that? Why is our generation lagging behind in early retirement planning even when we have the presence of high return investment modes which are not even very hard on the pocket like Systematic Investment Plans?

In this article we will be looking into the reasons that are making us lag behind in retirement planning, so that you know well in advance the things that can go wrong and start investing smartly, today, when you have the privilege.

You Could Have Started a Lot Earlier

Back in your 20s you believed that the stage of retirement is way too far to even plan. In 30s, buying a prime car was a lot more important. And instantly in your 40s, you got the realization that you have minimal time to start planning for your retirement and the worst thing is that you have very low surplus amount lying around to even think of investing now.

And now when you are in your 50s and your mind and body needs a break, your finances are nowhere ready for it. You have no funds to get you a monthly revenue stream. What is the option left? Keep working for 10 more years to create the surplus to then retire with ease.

You see what happened here? The years when you could have taken risk, or even gone with a risk free mode by investing in SBI SIP plan, you wasted by leading an income – spend – hand-to-mouth financial situation.

A lot or a Lot Less Diversification

Situation 1: Your finance manager asked you to diversify and you did. You heard him and diversify in a number of asset classes.

But weirdly the returns that you expected is nowhere in sight. You, my friend, are a classic case of jack of all trades and master of none. The excessive diversification that you invested in kept you from reaping the benefits that investing in one asset would have got you.

Situation 2: So your investor asked you to diversify and you ignored them. Your SIP portfolio was majorly concentrated on debt funds while the other investment type was divided between a saving account, fixed deposits, and maybe shares. While this plan is giving you a good 4% to 8% returns, you have been hearing that returns from equity fund investment gets you 15% to 18%. Now, had you listened to your portfolio manager and invested in both debt and equity, you would have a different story to share.

You are Constantly Fiddling with The Funds that you have

It’s not your fault. It is indeed in our habit to withdraw money from one account when the other account starts getting low. The same applies for investors as well. They keep taking out money from the funds with the promise to fill the account again someday. A promise rarely kept. It is human nature to withdraw from bulk investments when we are in dire need of money.

However, what we tend to forget is that frequent fund withdrawal from portfolio tends to upset the good looking balance that you have created, in fact the balance almost always lowers. So, if early retirement is what on your mind, bring some stability in your life!

Underestimating the rate of Inflation

Underestimating this point can turn out to be nothing short of a mainstream mistake. Every passing financial year, the rate of inflation of also increasing and so is the comprehensive price of commodity and services in economy. And with that the next thing that will grow are your household expenditure amount.  So when you plan your investment with future as your starting point, underestimating of inflation is what will land you into grand trouble.

What is the way out? If you are assuming that the inflation rate after 65 years would be 7%, invest according to 8%.

So here were the four reasons that might be contributing to you not being able to invest as much as you want to in name of early retirement planning. T question is “what are you going to do about it?”

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