What Are The Financial Red Lines That You Mustn't Cross When Planning Your Retirement?

When planning your retirement, you need to carefully take the right financial steps and avoid the wrong moves. A mistake in planning can get bigger and bigger as you get closer to retirement and then you may not be able to reverse it. So, you may draw the red lines that you mustn’t cross when planning your retirement. It can help you avoid mistakes. Here are some of the important red lines that you must not cross when planning your retirement.

Piling Up Unplanned Debts Before Retirement

Are debts bad for your financial health? Not necessarily, but excess debt and especially unplanned debts can be bad for your financial health. So, if you keep piling up unplanned debts before retirement, then you may not be able to repay them and your retirement life may get financially spoiled. So, draw a red line to plan your debt requirements at different stages in your working life and try to avoid crossing that line. For example, you may plan to buy a home by taking a home loan of up to Rs 1 crore when your age is 30 and repaying the loan in 20 years, or take a car loan of up to Rs 10 lakh at the age of 40 years and repay the same in 5 years. You need to adhere to your plan by not exceeding the planned loan amount or unnecessarily increasing the repayment tenure.

Giving Wrong Information While Buying Health Insurance

Health insurance is essential for everyone, for people in every age group. The need for health insurance increases as you get older. However, you must not cross the red lines to get a health policy.  What are those red lines? They are things like hiding the material facts from the insurer, suppressing information related to health issues, not disclosing smoking and drinking habits, etc. Giving wrong information or hiding material facts may result in a claim rejection or cancellation of your policy in the future.

Overlooking Risk Appetite While Choosing An Investment Instrument

Depending on your age, you should draw the red line for your risk appetite and you must not cross that line when making investments. People who invest over and above their risk appetite may suffer heavy losses and if they are close to retirement age then they may not even get a chance of recovering from such losses. It’s important to take an adequate level of risk at different stages in your life to secure the required rate of return for accomplishing your financial goals on time.

The financial red lines can be altered or redrawn depending on changes in your financial goals, income and age.

The author is an independent financial journalist

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)