Myth #1: I would have enough savings, and my Provident Fund

FACT: Most people think that they have built up adequate funds in savings and through regular contributions to provident fund, it will last them after retirement.

But a key fact to consider is inflation. Inflation eats into your savings and can spoil your plans of a calm and cushy retirement life. Even the PF funds may not suffice because inflation will grow faster than the PF interest rate of 8.7 percent.

Any other small savings like bank deposits may not also match up to stocks and securities in beating inflation. So ensure that stocks and securities form an important part of your portfolio.

Myth #2: I will spend less after my retirement
 

FACT: This is a common misconception in India that retirees spend less. But the real fact is that lifestyles remain more or less the same and living costs go up with inflation whether the individual is young or old.

Sometimes, people end up spending more because they have to travel or go on a pilgrimage, indulge in unfulfilled hobbies and interests. Though you will spend less on commuting and clothes, offsprings’ education etc, you cannot suddenly downgrade your lifestyle if you are used to a higher one. Try building retirement funds taking into account all of these factors.

Myth# 3: Health insurance may not be enough

FACT: It is prudent to take health insurance in early years because as you age getting insurance becomes costly or more difficult to obtain. Even if you did get a health insurance cover, ensure that it’s adequate to cover rising medical expenses. You may also go for a critical health insurance plan and ask your children to include you under a group insurance scheme their employer offers. Keep aside some amount to build an emergency medical coffer.

Myth #4: After retiring, my approach to investment should be conservative

FACT: While the fact that with retirement you get some surplus funds, you need not stop your investment from working to get a decent return. Retired people are very concerned about the safety of their retirement corpus and stay away from risky avenues like the stock market. But an important fact is that you should not outlive your savings. Any avenue that offers good returns even after discounting inflation must be seriously looked at to boost the retirement kitty.  You could even invest a small part in stocks/securities to gain from their higher returns.

Myth #5: My children will look after me

FACT: Most Indian parents think that spending on their children’s education and upbringing is their insurance as they will support them in later years. But with globalization and nuclear families becoming the norm, you never know where your children are going to settle and whether they can provide for you as they look after their own families.

Rather than pledging their own resources for children’s education, the parents should focus on building the retirement corpus. Children must be encouraged to seek other sources of funding their education like scholarships, education loans etc.

Myth #6: 'My tax liability will be lower after I retire.

FACT: It is true that your income tax liability will come down after retirement. You don’t pay any income tax since your income is nil. However, there is a likelihood that tax burden may remain the same or go up depending the kind of income you earn from your investments and other sources of income. Know that rental income, capital gains even interest beyond Rs.10,000 is liable for tax.

Seeking safety leads many pensioners to invest the lump sum they receive at retirement in safe avenues like fixed deposits, real estate and so on. But you must look at PPF, Mutual Funds and ULIPs where tax exemptions are better.

Myth #7: If I build a house, it would sustain me through old age

FACT: A house is a good thing to have when you retire because that means you don’t have to pay rent. But make sure that you’ve paid off all loans and liabilities on the house. You can also rent part of it to earn rent and sustain yourself, but that alone cannot suffice for rising living and medical costs. Banks also offer reverse mortgage as a means of regular income nowadays. But with most Indians having an emotional attachment to the house and thinking of it as legacy for their next generation, senior citizens do not opt for it. 

These myths linger on despite the changing economic realities and the sooner an individual realizes this, the more he can focus on building an alternative retirement plan.