What happy retirees get right?

A recent survey found that on average, Indian employees are on course to achieve only 71% of the income they will need in retirement. This may be a result of inconsistent savings habits; only half (51%) are saving habitually for retirement. Further nearly three-quarters (73%) of Indian workers expect that they will have to support family members financially apart from their spouse or partner after retirement. Children (45%) and ageing parents (39%) are most likely to need support.

Still two-thirds (63%) of Indian workers are optimistic that they will have enough money to live on in retirement. Here is what they are doing right:

1) They save. More crucially they start saving early. They harness the power of compounding by starting early and by sticking to a plan. They make saving a habit. Even if it is a small amount, start saving today and invest it for the long term.

2) Never chase stocks. Fads come and go. Every day a different financial expert will sell a different hot stock. They will play on your emotions on how you are missing out on long term riches by not investing in this or that stock. What will follow are anecdotes on how someone made a killing on a certain tech stock or a pharma stock, but no will talk about the thousands who lost their shirt speculating. Smart long term investors don’t fall for this trap. They keep their emotions in check and use Index funds to get the job done.

3) They stay invested. What fun is speculating with 20% of your investable wealth while the rest languishes in low return bank accounts and FDs while you wait for that magic stock to invest in? That magical idea never comes and soon you have lost 5, 10 or more years of market returns waiting for that moment of brilliance (or luck) that would have made you wildly rich overnight. So take the easy route and stay invested for the long run.

4) They don’t overpay for financial advice. If like us you believe that beating the market is hard and timing the market effectively is harder still, then it becomes easy. Just buy into low cost index funds periodically. Avoid paying commissions or other fees on your investment and watch your nest egg grow big.

In the end, it is always about keeping it simple. It works.

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