You are in the joyous thirties. It’s the time to party and enjoy. After all, it’s the YOLO generation…. You Live Only Once. You would rather spend today, than save for tomorrow. The 30s is also the time you make financial decisions, which can impact your whole life. Before you realize, retirement is upon you and you have saved nothing for it. More than 45% of the working citizens of our country, do not save for retirement. Do you want to be one of them?
It’s not wrong to enjoy life to the fullest. But, you must save and invest for retirement. Things are so costly today. What would they be tomorrow? You surely won’t go searching for a job at 60. You need to save and invest for retirement, TODAY. It’s no point regretting tomorrow….Oh, why did I not save for retirement? Avoid these financial mistakes in your 30s and enjoy a happy retired life.
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Public Provident Fund also called PPF, is a very popular long term investment in India. It is backed by the Government of India. PPF is an excellent investment if you are a conservative investor. You get better returns than a fixed deposit. PPF currently offers an interest rate of 8%. This interest rate is higher than the fixed deposit.
Rise in the price of goods and services with time, is called inflation. For an investment to be called good for retirement, it must give returns much higher than inflation. RBI has set an inflation target of 5% by March 2017. PPF currently offers 8% interest for the quarter January to March 2017. PPF gives returns much higher than inflation.
Your investment in the PPF enjoys EEE benefits. You get a tax deduction up to INR 1.5 Lakhs a year, under Section 80C. The returns earned and money withdrawn at maturity, are tax free. The interest you earn on a fixed deposit is taxed, while PPF gives tax free returns.
If you are a salaried employee, you have to compulsorily invest a part of your salary, in the employee provident fund called EPF. Your employer also contributes an equal amount to this fund. EPFO currently offers an interest of 8.65% a year. The Government wants you to invest for retirement and EPF is the right way to do so.
It’s a common practice to withdraw money from the EPF, when you change jobs. EPF allows you to withdraw the money, if you are unemployed for more than 2 months. Many employees change jobs, claim to be unemployed and take the money accumulated in the EPF. This money is blown away in no time.
It is a good idea to transfer the EPF balance when you change jobs. With the Government issuing universal account numbers or UANs (a 12-digit number given to each member), this is not much of a problem. You can easily transfer EPF balance, using the UAN. There are citizens who have retired with more than a crore, simply because they have not touched money in the EPF till retirement.
Term life insurance is the cheapest life insurance. If you are the sole breadwinner of your family or have dependents, you must avail term life insurance. You pay a fixed sum of money called a premium, to a life insurer and avail a term life insurance plan. You pay this amount for a fixed time period called tenure or term of the policy.
If you (policyholder) die before the tenure of the plan, the life insurer pays an amount called the sum assured (death benefit) to your spouse and children (nominees of the term life plan). If you survive the term of the life insurance plan, you get nothing.
When should you avail a term life insurance plan? It’s best to avail a term life insurance plan, when you just start working. You need to be covered under the term life insurance plan, till you retire.
The Ideal Term = Retirement age – Current age.
If you are currently 28 years and plan to retire at 60, you must be covered under the term life plan for:
60 years – 28 years = 32 years.
Advances in medical technology can cure/treat almost any disease. But, treatment can be very costly. Hospitalization can wipe out your savings in an instant. This is why you need health insurance. Just avail a family floater health insurance plan. Your entire family is covered under a single health insurance plan. If any of your family members fall ill, this family floater health plan is very useful.
There’s nothing wrong in having a little fun. But, First Save and Invest for retirement. Life is short and before you realize, retirement is upon you. To enjoy a happy retirement, you need money. Better collect this money when you’re working? Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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