5 money mistakes that can ruin your golden years despite a decent retirement corpus  

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Having a large enough retirement corpus is a goal that should be part of every person’s long term financial plan. However, even if you have cobbled up a decent kitty for your retirement, you have to be careful with your finances during your golden years. Here are a few mistakes you must avoid to ensure that you truly enjoy your golden years.

Not having adequate health insurance

As your retirement comes close and your employer-provided health insurance cover is set to become non-operational you must purchase your own insurance. This should have been done long ago since a parallel insurance of one’s own is a safety valve in case of job loss. But it is even more important now. Going into your golden years sans health insurance is akin to trying to enjoy skydiving without a parachute. “Health issues increase as age increases. With the rising medical expenses, it is important to have a financial back up to fund at times of medical emergency. You can either buy a health cover or children can have family cover which include senior citizen parents,” Anil Rego, Founder and CEO, Right Horizons said. At the time of retirement do ask your employer’s insurance provider if they are keen to offer you an individual policy. It will help you get the waiting period waived.

Not allocating to equities and gold

With rising life expectancy, you run the risk of living long. In that case you are exposed to inflation risk. If you do not invest in equities using index funds or diversified equity funds, then your portfolio will lose purchasing power. Including gold along with equity helps you fight inflation and reduces portfolio volatility. At least allocate 10% to equities and 5-10% to gold. “Equity is crucial and should not be ignored. Being invested will help at all times. Do make friends with equity if you have not already. Equity could be like that child who will always serve you; no matter what,” Kartik Jhaveri, Director, Investment Services, Transcend Capital, said.

Ignoring cash-flow needs

Expenses do not stop after your work life comes to an end. Your monthly bills such as electricity will keep coming. Your insurance policy, be it for yourself or your car, has still to be paid.  You have to pay heed to such cash outflows and plan your investments accordingly. “You must undertake a financial/retirement plan with factors in an overall assessment of cash flows. This includes planning for any needs that are likely to come up post retirement, which might include children’s marriage,” Rego said.

Falling prey to new aspirations

Often individuals plan for a certain lifestyle during the golden years. However, due to peer pressure or to fulfill some aspiration they end up overstretching it. It could be buying a villa or going for a world tour, which may not be provided for in retirement planning. One such large expense may land you in trouble as your remaining corpus cannot provide for the requisite lifestyle in the remaining years of your life.

Paying for others’ needs

Many times when you receive a large corpus in hand as proceeds of EPF or PPF there is a fair chance that your family members may approach you for money. Your children or other close family members might be keen to buy a house or a car or a second house and need extra funds. If you are contemplating writing a cheque for them, then think twice. If you are not in a position to say no, you can always protect your interests by either making a small contribution or by ensuring that you get co-ownership of the asset. If you are being asked to pay for some expenses which do not produce any value, do not cave in.