Top 10 Retirement Planning Mistakes and How to Avoid Them


Jennifer Robson
5 October 2017

Here are some of the biggest mistakes that people make when planning their retirement and ways that you can avoid them. 

1. Underestimating your lifespan and overestimating your investment returns
Current assumptions are that most people will now live to reach at least 90. That means that they need savings and investments sufficient to last at least 25 to 35 years in retirement. 
Investments are typically returning results about 2% lower than a decade ago.  This has meant that people have had to delay their retirement date because the money they set aside has not grown at the expected rate.  They didn’t review their portfolio frequently enough to make adjustments to cover slower growth. 

2. Being clueless about pension basics
Many people do not understand the fundamentals of their pension, they are unsure how it will be paid out, what the monthly sum would be and how long the monthly payments would continue.  As you build your pension pot make sure to ask your pension provider these kinds of questions. 

3. Not being up to date with pension plan changes
Ensure that you read correspondence regarding your pension and ask questions if changes have been made so that you understand the consequences. 

4. Underestimating retirement expenses
Retirement is expensive.  You will most likely want to maintain your current standard of living.  You are also more likely to require additional medical care and support as you reach old age, this can be expensive so plan for it in advance. 

5. Not diversifying enough
Understand which assets you are investing in and be prepared to change your portfolio to adjust your exposure to risk

6. Tying up too much money in your home
Investing too much money into your home can leave you still paying off a mortgage when you reach retirement age.  This can dramatically limit your retirement income.  You may find that you don’t have the income to sustain the property

7. Not accepting the need to reduce spending
Reducing debt and expenses while you are still working should be part of the blueprint. Serious talks with a financial planner or wealth manager should begin at least 18 to 24 months before the planned retirement date. Conversations with other partners and a spouse and family members about the transition also need to happen then.

8. Overlooking the tax implications of your pension plans

9. Don't say "Take this job and shove it." Even if a person quits the full-time job, he should consider continuing some kind of work.

10. Don’t ignore major expenses such as helping your children with a wedding, to buy their first home or the arrival of grandchildren. 

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