Home » Headline, Personal Finance

4 Mistakes Not to Make about Retirement

23 September 2018 No Comment

In the heyday of working life, it’s something that most of us don’t give a second thought to. Even though it’s seemingly mentioned every day on the news, most of us think that retirement will never really happen to us. Unfortunately, it does. Not only that, but it can be a pretty scary time.

As today’s title might have suggested, our aim is to go over four of the biggest mistakes that are often associated with retirement. In other words, if you can avoid these, you will be well on your way to a much more fruitful period of post-working life. Let’s delve into them.

Mistake #1 – You forget the “ugly” expenses

We’ve used the term “ugly”, but every reader under the sun could probably think of countless other adjectives to describe what we are about to look at.

We’re referring to the likes of elderly care and beyond that, the cost of paying for a funeral. While these might be subjects that aren’t particularly nice to look at, for the purposes of planning for retirement they have to be taken into account. Combined, they can make up tens of thousands of pounds – so make sure all of this is accounted for as you prepare to hit the R-button.

Mistake #2 – You don’t think you will spend as much

As we approach the retirement age, a lot of us mistakenly believe that we will spend less in our post-work life. We’ve no idea where this myth has come from – but don’t believe it.

In fact, this can be very dangerous. When you do decide to retire, you will suddenly have a lot more time on your hands. Ultimately, this is time you have to spend more money. Not only that, studies have shown that there’s a process going by the name of “deferred” spending. People suddenly realize the euphoria of being free from work, and go on a huge spending spree in the immediate aftermath of retirement. Again, don’t fall into the trap.

Mistake #3 – You retire too soon

Unfortunately, there can be a case of retiring too soon. The age that you “should” retire is constantly changing and to make matters more complicated, it varies depending on where in the world you live. Bearing this in mind, it’s hard to go into the exact circumstances you will run into if you decide to retire too soon.

However, let’s coin a few examples. If you retire too early in the UK, you won’t necessarily be entitled to a state pension. Then, if we turn to your private pensions, if you retire too soon you might have too long to “spend” it in. Both can cause major problems.

Mistake #4 – You start saving too soon

The numbers we are about to highlight can be quite shocking, but should hopefully show just how important it is to start saving for your pension in good time.

Let’s take the example of a fund which pays an annual return of 8%. If you were to save $10,000 per year for fifteen years, this would grow to $293,243. However, if you were to save for an extra five years, this would be at almost $500,000.

Suffice to say, it’s a huge difference, and those extra few years really can make a big difference to your total fund.

Comments are closed.