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Thursday, 16 October 2014

Why Some Working People Cannot Retire Early?

Many working people dream of retiring early in their lives to lead a life of leisure. But many do not succeed. Why? Here are the reasons:

  • Lack of AdequateSavings : If you want to retire at the age of 60, you should set aside at least 10-15% of their income for retirement every month. You want to retire at your 50? You need to put away a larger portion of your income (say 20-25% of your income) for retirement planning.

  • Not Saving in the Right Avenue: Needless to mention, safety is a big concern for everybody but being too conservative can also pose a risk. A 100% debt-based retirement plan will not be able to grow at the required rate. Instead, you need to have at least 25-30% of your retirement portfolio in stocks to beat inflation in the long- run.

  • Lack of Investing Discipline: Investing just for 6-8 months or for a few years is not enough. Investment should be made for decades both in debit funds & also in stocks for a long-term benefit.

  • Often Dipping in to Savings: Young working people often find it difficult to suppress the temptation to withdraw their retiral benefits when they change jobs. Sudden rush of liquidity and the heady feeling of a new job is deadly combination and usually results in expenses. Every time job is changed, retirement plan is in danger of getting derailed.

  • Miscalculation of Needs: Lot of working people do not take inflation in to account when calculating retirement needs. All working people should keep in mind that though many expenses such as clothing, travel and entertainment, will come down in retirement, others such as health care will go up.