Five Common Retirement Planning Mistakes to Avoid
Some people who are still in active employment believe they need to accumulate money in the hundreds of thousands by the time they retire in order to live comfortably. Others are also of the view that they only need a little to take care of their most basic needs. Whatever you decide, there are five common retirement planning mistakes you have to avoid.
When planning your retirement, it is important to consider inflation factors. For example, a couple planning to spend ¢10,000 monthly during their 60s will need more than double that in their 80s. It’s important to create a plan to increase your savings in order to enjoy the same standard of living. You may therefore like to consider paying your pension funds to a credible corporate trustee such as PenTrust who can t give you returns well above the prevailing inflation rate.
“If you are part of a matched Tier 3 Provident Fund scheme at work, you may consider contributing the maximum percentage permitted right from the beginning, instead of contributing the minimum percentage while hoping to increase it sometime in the future. By doing this, you are assured of maximized contributions and returns.
If you haven’t set specific retirement goals for yourself, then what are you saving towards? How will you know if you’re on track or not? Simply saving “for retirement” won’t cut it.
Instead, think about what you want out of retirement so you can estimate how much it’s going to cost. Finance professionals recommend that people save up to 80 percent of their final working year’s salary for each year of retirement.
Don’t forget to include basic needs like medical care. Once you determine how much retirement income you’ll need, you can set specific savings goals designed to get you there.
When you’re young and have just started saving for retirement, you can consider an aggressive approach because there is likely to be plenty of time to recoup any losses. When you’re in your 40s and 50s, you can still afford to take some risks without too much concern. However, once you’re within 10 years of your planned retirement age, you should review your allocations and consider more conservative investments.
Apart from your pension funds which are being managed by PenTrust, you should not ignore your investment portfolios elsewhere. You can follow up on current interest rates on the market and scout for investment service firms who can give you good returns. You could also consider investing on the stock market because while it may be a risky venture if stock prices fall, you can equally earn significant returns if the prices go back up.