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8 Common Pension Planning Mistakes to Avoid

Pension planning is not just about putting money away; it’s about strategizing for a comfortable retirement. However, many individuals make common mistakes that can compromise their retirement savings. Here, we delve into these oversights and how to manage them for a secure financial future.

Mistakes to Avoid


One of the biggest blunders is delaying pension planning. The earlier you start, the more time your investments have to grow. Start investing in a pension plan as soon as you begin your career. Time is your biggest asset when building a substantial retirement corpus.

Underestimating Expenses:

Many need to pay more attention to their post-retirement expenses, leading to inadequate savings. Factor in inflation and potential healthcare costs when calculating how much you’ll need. A good rule of thumb is to aim for a retirement income of at least 70-80% of your pre-retirement income.

Overlooking Diversification:

Relying solely on one type of investment for your pension can be risky. Diversify your portfolio across asset classes like equities, bonds, and real estate. Consider pension plans that offer diverse investment options to mitigate risks and maximize returns.

Ignoring Tax Benefits:

Pension planning India contributions are deductible under the Income Tax Act (80CCC) as a tax exemption. Utilize these tax benefits as they may benefit your savings. Besides the above, you can also find schemes like NPS (National Pension System), which provides tax benefits and retirement planning opportunities.

Not Reviewing Investments Regularly:

As you age, your financial situation and objectives change along with them; thus, your pension plan should adapt, too. Review your pension portfolio periodically and modify it as needed to accommodate changing income, expenses, and market trends. Keep abreast of your investments occasionally to align with your retirement goals.

Underestimating Longevity:

The span of the retirement stage is equally affected by the longer life expectancy. If you ignore that, you will most likely need your money for longer and face financial insecurity. Think of a retirement that may last for 20-30 years or even longer, and make preparations to fund your life for this long.

Ignoring Inflation:

Inflation decreases the value of money with which one can purchase commodities while the prices of goods and services increase. Inflation is unavoidable regarding retirement planning, and underestimating its effects can lead to a lack of money. If you must keep the value of your savings, invest in inflation-indexed pension plans or invest in investment vehicles that can earn you more than the inflation rate.

Not Seeking Professional Advice:

Planning for pensions is complicated and even more so with the endless choices. Consulting a financial counselor will guide you through the jungle of pension plans, teach you about your risk tolerance, and devise a strategy corresponding to your goals. A qualified person can offer customised guidance on the best way to set up your pension portfolio.

Lastly, making a retirement plan in India is a needful step that requires careful thought and action to have a happy and decent post-employment life. By avoiding these frequent errors and applying a prudent way of saving and investing, you can develop a durable pension fund, which guarantees a stable financial future. Start on time, keep diversified, and look for professional advice to optimize your ability to plan your pension. The bottom line is that you must put your mind to work right now to ensure a stress-free retirement.


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