Saving for your retirement is important because you want to live out your golden years enjoying life and not worrying about how you can get more money to pay the bills. If you do have a pension pot of some kind, that’s a good thing. But what if you don’t or are going about it in the wrong way?

We take a look at five common pension mistakes people make:

1. Starting too late:

It is a common mistake to think that you have ‘all the time in the world’ to save towards your retirement, especially when you are young. But experts advise that the sooner you begin saving the better and easier it is to reach your goals because of the compound interest earned.

Saving a smaller amount, but starting sooner, could save you from having to pay more closer to your twilight years.

2. Investing incorrectly:

Making the right investment choices can be a difficult as there are so many products to choose from. But steer clear of emotional decisions, especially when the market is underperforming.

As the saying goes, do not make long term decisions based on current or short term circumstances. If you are not sure of what to do enlist a trusted financial advisor to assist you on your savings journey.

3. Avoiding paying off debt before retirement:

At retirement you are allowed to withdraw your cash from any provident funds in addition to being able to withdraw up to a third from a pension fund. But if you haven’t paid off your debt this could be a huge burden on your pension savings.

The more debt you have to pay off the less money you have to live from.

4. Failing to review investments:

Your financial plan needs to be one that is able to change and grow with you and your new needs and targets. It is thus important to check in on any investments to make sure that you are still on track in achieving any previous or new targets set.

This will also give you a good idea of where you are at in your retirement savings journey.

5. Being uneducated about financial products:

A lot of focus is put on the savings journey up to the point of retirement but once you’ve retired it is still important to know how to manage your money correctly.

The most common financial products offered to retirees are fixed and living annuities. With a fixed annuity you are guaranteed a set income for the rest of your life, but once you die, no funds will be available to any of your beneficiaries. In the case on a living annuity on the other hand, you are able to leave money to chosen beneficiaries but you are in charge of the managing of your money. This is where the danger of mismanaging your money and running out of it comes in.

It is therefore vital that you are well informed of the correct products to best suit your financial needs.

Retirement due to a poor savings culture can be a dreaded time for some, but with the correct advice and tools in place it can be of your happiest years.

Until next time,
The MoneyShop.co.za Team