Question

(a) Analyse four (4) key factors that could affect one’s retirement planning. (10 marks)

(b) Discuss four (4) common pitfalls in retirement planning. (10 marks)

Answer 1

Key factors that could affect one's retirement planning:-

Retirement planning is not just about how much one needed to save retirement and where should be invested.
Ignoring other goal ls:
While planning for retirement is critical, do not ignore planning for other goals. Along with retirement planning, one should also plan for any pending expenses. If you don’t plan for other critical goals, may end up dipping into your retirement corpus to meet them.
Retreating from all work:
keeping oneself engaged in some activity after retirement is critical. The chance of falling sick is higher, if you suddenly shift to a sedentary lifestyle.
Not planning for regular income:
Generating regular income is essential to securing one's retirement. Gradually withdrawing money from the accumulated corpus may not be most suitable option. Expert advise people to invest a part of their retirement corpus in an annuity. Annuity is guaranteed income for life.
No Post- Retirement planning:
Experts say that retirement planning should not stop at the age of retirement. It should include planning for the period after retirement as well. Planning for the Post- Retirement phase is critical. Financial requirement is like the stumps in a game of cricket- Liquidity ( For Contingencies) , Regular Income and growth of the remaining corpus ( so that it lasts longer).

Common pitfalls in retirement planning:-

Having plan with outdated Assumptions:
While most people who are near Retirement age have a sense of how much assets they have accumulated, how much they will need to spend in retirement , and how long their money might last, most of people fail to have those number checked against market conditions.
Retiring too soon:
Working even a few years beyond what you have planned can pay a surprisingly large bonus in retirement security.
Underestimating Heath care Cost:
Even for those on Medicare heath care Cost can erode spending power and economic security for most retirees.
Not Diversifying your portfolio:
It is not uncommon for a retiree who worked at the same company for many years to accumulate a large amount of that company's stock in his or her portfolio.