There are factors that impact on the longevity of your retirement savings. It is critical that retirees avoid making common money mistakes, and rather make wise investment decisions.
Retirement planning is an ongoing process; in fact once retirement starts it becomes all the more important to make wise investment decisions.
Preenay Sathu, Channel Head at FNB Financial Advisory, says, “Retirees must have a clear strategy regarding how their retirement funds will be invested to sustain themselves through the years beyond retirement. Individual circumstances differ and this ultimately informs each person’s post retirement strategy.”
“The biggest mistake however is not having a plan at all or assuming that the funds available will be sufficient. Once retired, most people have no other source of income and rely entirely on their lifetime savings which may not be enough.”
To avoid making costly mistakes in relation to structuring your portfolio post retirement, consult a qualified financial adviser who can draw up a plan based on your personal circumstances.”
These are the common money mistakes that retirees must avoid:
Thinking there’s no need to invest anymore
To ensure your money keeps working for you, it’s important to have an ongoing post retirement investment strategy in place. For example, if you make a partial withdrawal from your pension fund and leave the rest in a living annuity, allocate some of the money withdrawn to an investment vehicle. Also important to consider is that there may be fees attached to your investment, do some research about how much it will cost you to invest and avoid surprises.
Not understanding tax and retirement
Even after retirement, the taxman will still knock on your door as being retired does not exempt you from paying tax. For example, 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. Tax is something you can never avoid and therefore the best approach is to seek advice about how as a retiree you minimise the tax implications from certain financial decisions you make.
Taking advice from friends and family
Financial planning is a complex subject matter that only qualified advisers should give advice on. Never take as fact the word of a friend or family member. Remember that every person’s situation differs, therefore while a particular solution may have worked for one person, it does not mean that it will work for you. Consult a qualified financial adviser who can do a thorough needs analysis of your finances and develop a plan for you. Some people also believe they can tackle financial planning on their own, it’s possible but only if you are suitably qualified and have the apt skill for making financial decisions. The biggest lesson here is, seek professional assistance.
Not cutting down expenses
Make sure you cut down on expenses. Because you no longer have an income it’s important to ensure every cent is accounted for. For example, you have probably paid-off your house, but think about how much the upkeep of the property is costing you. Consider moving into a smaller property. An important exercise for every individual is to review your budget and assess opportunities to reduce expenditure.
Investing too conservatively
Understandably, you have worked very hard your whole life and now look forward to a comfortable retirement. However, there are still some crucial decisions to be made regarding your retirement, especially when it comes to allocating your money in a way that will lend longevity and growth. Maintaining too conservative an approach to investing can have adverse consequences in the long-term. Ensure your investment asset allocation allows room for the provision of growth over the long term.
“The fact that you have catered well for your retirement savings does not mean it’s time to lose focus. There are still factors such as inflation, medical costs and living expenses that may impact the longevity of your retirement savings. It’s therefore very important to maintain a long-term view after retirement,” concludes Sathu.