Retirement planning – 7 mistakes to avoid at all costs
You may think you have everything planned and lined up just right when it comes to your retirement. Or you may not have started investing yet, but you’re convinced that you have a plan in your head which will ensure you live the good life in your golden years.
However, it’s unrealistic to think that you would never make any mistakes when it comes to investing for your retirement. Let’s run through some common errors that people make when saving up for thier pension, and provide you with tips on how to fix them if you make some errors.
7 retirement fails you can avoid:
- Believing you have enough money: It’s important to have an ongoing post retirement investment strategy in place. Have you made any partial withdrawals from your pension fund? If so you may want to talk to your financial advisor to find out if you still have enough for your retirement. You may need to make a top up or up your monthly payments.
- Paying high fees: Do you perhaps know what you are paying in fees? Fees and early withdrawals could eat into your capital and if you don’t watch out and find out the exact impact of these two things you could be left short. Find out from your advisor how much you are paying in fees and how you could reduce them.
- Putting your head in the sand when it comes to your tax obligations: Retiring doesn’t exempt you from paying tax. If you made a partial withdrawal from a pension fund and bought a living annuity, you may be taxed on the income from the annuity. If you are uncertain about your tax obligations it’s best to consult an accredited financial advisor or tax expert.
- Taking financial advice from friends and family: You may be discussing your retirement plans with friends or family around the braai one weekend and believe that a financial tip offered by one of them may be a good idea to take on. But their strategy may be right for them and may not be right for you. Rather get in touch with a qualified financial adviser who can establish your needs and work out a plan for you.
- Not doing away with expenses and unnecessary luxuries: While you may have paid off your house is it realistic to stay in the one you currently own? Consider downscaling in your retirement as the upkeep of the property you currently live in may be a big drain on your finances. Check your budget and see what else you can cut out from your life, e.g. reducing the number of times you go out to eat can do much to ensure you live a more comfortable life in retirement.
- Investing it all in cash: It can be frightening investing in the markets when there’s a lot of volatility and you’re not sure from one moment to the next when they will recover to boost your capital or your income. You may want to take your money out of equities and invest in simple bank accounts or money market funds but you may ultimately be doing more harm than good. You need to, after all, take things like inflation into account and if your money isn’t growing enough you may not achieve your retirement investment goals.
- Not staying informed: When last have you found out the balance of your retirement savings or asked your financial advisor if you are still on track and if you are investing in the right balance of assets for your age, income and growth needs. Are you also keeping up with investment news and keeping an eye on how that impacts on your retirement? If not, it’s never too late to start. And if your savings have been impacted negatively, get the right advice to get yourself back on the right track.