My Google search for “retirement” produced 1.78 billion results, indicating that there’s an overwhelming amount of incomplete, unstructured and half-cooked information about retirement planning on the internet.

However, the truth is that there’s no one-size-fits-all solution for retirement planning. Nevertheless, there are some common myths and key factors that need to be understood.

Common Retirement Myths

– What worked for your grandparents may not hold good now

When it comes to retirement, many people think that what was true for their parents and grandparents still holds true today. Chances are, your grandparents spent a frugal life style after retirement, they didn’t live long enough to incur many medical costs that we need now.

Health-care costs are expected to keep rising. In the new age, people spend their retirement years often visiting places and generally spending an active social life, which was not the case for earlier generations. The realities of a digital society have put a greater onus on the individuals to save more for their retirement.

– Retirees typically need 70% of their pre-retirement expenses 

Another retirement myth is that retirees will have lower expenses than what they had incurred during their working years. While it is true that when individuals stop working they no longer have to pay high taxes or spend for office conveyance, it is a misconception that such ‘savings’ won’t be absorbed by extra expenses towards travel and leisure activities during the retired life.

– If you haven’t saved enough, you can always get a part-time job in retirement

Although it may be possible to continue working until the age of 65 or beyond, unforeseen changes to your health (or to your spouse’s health) may inhibit your ability to continue working or even to do a part-time job. Finding part-time work in retirement can also prove to be challenging. Retirees often find well- paying part-time jobs very few and far between or they are far more demanding than they have envisioned.

Factors to consider

– 4% rule needs to be debunked

Inflation is a key risk that needs to be factored in properly when assessing whether you have enough corpus to retire. With future inflation rate being unknown now – and impacted by several variables beyond our control, such as rupee exchange rate or food inflation – having a buffer in your retirement corpus is absolutely necessary.

While many people provide for a 4% increase in spending per year to account for inflation, the actual inflation rate could be much higher.

Remember, inflation rates of food items and health care services, two essential requirements for any retired person, are much higher than the general retail inflation rate. If the actual inflation rate turns out to be higher than anticipated, then you may have to dip into your savings corpus, as the returns earned will not be sufficient.

-Outstanding debt needs to be cleared

Another important point to consider is whether you have any outstanding debt that still needs to be paid. Outstanding EMIs for vehicle repayments or home loans, for instance, could eat into your corpus very quickly. Hence, better to focus on repaying any pending debt before you retire. They could make a huge difference to your monthly expenses post- retirement.

While no one can predict how long they may live or how markets may change, it is extremely important to assess the sufficiency and potential problems with your future cash flows, preferably with the help of a professional financial planner.