Retirement planning is an ongoing process which requires one to make wise investment decisions.
“Retirees must have a clear strategy regarding how their retirement funds will be invested to sustain themselves through the years beyond retirement,” Preenay Sathu, channel head at South Africa’s First National Bank (FNB)’s financial advisory, said this week.
Though individual circumstances differ, Sathu said that the biggest mistake however is not having a plan at all or assuming that the funds available would be sufficient.
“Once retired, most people have no other source of income and rely entirely on their lifetime savings which may not be enough,” Sathu said, urging potential retirees to avoid the following costly mistakes:
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. 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. 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. The biggest lesson here is seek professional assistance. 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.
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.