5 job-related mistakes that can derail your finances badly
Common Job-Related Mistakes: Retirement planning is an important aspect of financial stability. If a person wants a comfortable life after retirement, it is essential for him/her to have a solid pension plan. Although most people do plan for retirement, many make significant mistakes along the way. These job-related errors can have a serious impact on financial security in retirement. Here are five common mistakes people often make when planning for retirement:
Relying Too Much on EPF
Many young professionals believe that contributing to their Employee Provident Fund (EPF) is enough and neglect to explore other retirement options. However, EPF interest rates are government-controlled, and there are potentially better options available, such as the National Pension System (NPS). It's important not to depend solely on EPF and to consider diversifying your retirement savings.
Not Transferring EPF When Changing Jobs
It's common for people to forget to transfer their EPF balance when they switch jobs. This oversight can lead to a loss of interest earnings. To avoid this, always ensure that your EPF balance from your previous employer is transferred to your new employer promptly after changing jobs.
Starting to Save Late
Many young professionals delay saving for retirement, thinking they can start later. However, the earlier you start investing, the more you will benefit from compound interest, resulting in a larger retirement fund. By starting early, you can contribute smaller amounts monthly and still achieve significant returns by retirement.
Assuming Retirement Age is 60
While the official retirement age is often 60, many people find it difficult to work under pressure until that age. If you start planning for retirement early, you may have the option to retire before 60, giving you greater flexibility and reducing the pressure to continue working.
Ignoring Inflation
Many people fail to consider the impact of inflation when planning for retirement, assuming that today's savings will hold the same value 25-30 years from now. This oversight can lead to insufficient funds during retirement. It's crucial to account for inflation in your retirement planning to ensure that your savings will meet your future needs.