3 MYTHS CLIENTS HAVE ABOUT RETIREMENT PLANNING
Majority of Indians do not start saving early for retirement or build a sizeable corpus. Since the average life expectancy is around 65-70 years, they have the perception that they won’t need lots of funds in retirement. As a result, clients continue to concentrate on other financial objectives such as child’s education, marriage, buying a house etc. Listed below are few myths clients have about retirement planning and how financial advisors can explain the reality to them:
1. Sticking to fixed income products in retirement
Retired investors prefer a less risky portfolio because they believe they won’t be able to handle the instable nature of equity funds. Thus, they invest all their money in fixed income funds. Markets are undoubtedly volatile, but selecting a single asset category can be riskier owing to rising life expectancy. Interest earned from fixed income products alone won’t be sufficient to take care of living expenses keeping in mind the escalating inflation. Financial experts must explain to clients that allocating some part of their retirement amount to equities will help them gain better returns.
2. Health insurance will take care of medical expenses
Many people think that mediclaim will cover their healthcare expenditure during retirement. But they need to keep in mind that health insurance is restricted to hospitalisation. As one gets older, health problems tend to worsen. Moreover, hospital costs are rising with time. In case your client is bedridden and needs full-time assistance such as hiring a nurse, these outlays won’t be covered by health insurance. Therefore, financial advisors must suggest their clients to keep aside a minimum of Rs 5 lakh for such emergencies post retirement.
3. Provident fund is sufficient to cover retirement costs
Owing to the facility of partial withdrawal, many individuals cash in their provident corpus years before retirement, leaving little amount at superannuation. Encourage clients to invest some amount in SIPs to lead a comfortable life post retirement.
Source - ofa Infra
Majority of Indians do not start saving early for retirement or build a sizeable corpus. Since the average life expectancy is around 65-70 years, they have the perception that they won’t need lots of funds in retirement. As a result, clients continue to concentrate on other financial objectives such as child’s education, marriage, buying a house etc. Listed below are few myths clients have about retirement planning and how financial advisors can explain the reality to them:
1. Sticking to fixed income products in retirement
Retired investors prefer a less risky portfolio because they believe they won’t be able to handle the instable nature of equity funds. Thus, they invest all their money in fixed income funds. Markets are undoubtedly volatile, but selecting a single asset category can be riskier owing to rising life expectancy. Interest earned from fixed income products alone won’t be sufficient to take care of living expenses keeping in mind the escalating inflation. Financial experts must explain to clients that allocating some part of their retirement amount to equities will help them gain better returns.
2. Health insurance will take care of medical expenses
Many people think that mediclaim will cover their healthcare expenditure during retirement. But they need to keep in mind that health insurance is restricted to hospitalisation. As one gets older, health problems tend to worsen. Moreover, hospital costs are rising with time. In case your client is bedridden and needs full-time assistance such as hiring a nurse, these outlays won’t be covered by health insurance. Therefore, financial advisors must suggest their clients to keep aside a minimum of Rs 5 lakh for such emergencies post retirement.
3. Provident fund is sufficient to cover retirement costs
Owing to the facility of partial withdrawal, many individuals cash in their provident corpus years before retirement, leaving little amount at superannuation. Encourage clients to invest some amount in SIPs to lead a comfortable life post retirement.
Source - ofa Infra
Comments