Planning for retirement is a more complicated business than it used to be. In the past, many people spent their entire working lives with a single company and paid into its pension fund from their wages each month. Nowadays, it is a lot more common for people to move between different employers, with many also spending part of the time in self-employment.
All of that makes preparing for life after work more difficult and leads a lot of people to make costly mistakes. These are the most frequent ones that an expert in retirement planning in Shropshire, or wherever you happen to live, can help you to avoid.
Failing to build sufficient savings
An astonishing statistic shows that close to four out of every 10 working adults in the UK have no pension. What makes that stat even more alarming is that 1.4 million of those people are moving into the last 10 years of their lives before they are due to retire. Failing to save sufficient money to fund life after they stop working is one of the errors people most frequently make.
The average needed to be able to enjoy a comfortable retirement is £24,300 per year, but the average that most pensioners live on is £16,600. Speaking to a specialist and starting to plan and save as soon as possible can help you avoid that problem.
Putting off making a retirement plan
For much of their working lives, people tend to view retirement as something that is far in the future. That means they think they can leave putting together a financial plan and starting to save until later. This is a big mistake.
The more you delay saving for retirement, the costlier it will be to build up the necessary nest-egg. Compound interest is what helps to grow your pension and each decade that you fail to start saving into a pension pot has the potential to cut its growth by up to 50%.
Failing to keep an eye on investments
A lot of people who do have pensions – 41% of them according to research – have lost track of what investments they have made for retirement. It is a mistake not to keep an eye on these though, because some investments produce better returns than others.
Speaking to your advisor on a regular basis and keeping updated about how many investments you have made for your retirement are performing will help you avoid that error. You should have a plan in place with what the expected returns for each of them are.
Therefore, if any of the existing investments are not delivering the sort of returns needed, your advisor will be able to suggest alternatives.
Depending too heavily on property
Property can be a pretty reliable asset, but thinking that owning property is all you need to secure your retirement is still a mistake that many people make. Any professional financial planner will tell you that the key to successful investing is to spread your money between several different asset classes.
Therefore, any investments that you make towards your pension fund should combine property with things like bonds and stocks. Ideally a mix of safe, lower risk investments and higher risk ones with the potential for greater returns should be the strategy.
Expecting to inherit money
One reason why some people do not plan for their retirement is that they are expecting to inherit money or other assets from their families that they think will finance it. That is not necessarily entirely wrong, but depending completely on it can prove to be a big mistake.
People are living for longer than ever before; that means there is a very strong chance that you will not inherit until well into your retirement. At the very least, being dependent on your inheritance could see you forced to work for longer than you really want to.
Failing to take advantage of tax reliefs
Pension payments are an area where you can claim tax reliefs, which can significantly reduce what you have to pay. These reliefs can range from 20% to 45% depending on your tax bracket, so not exploiting them is a real error.
Depending on the state pension
A lot of people expect to just use the state pension to live on after they retire, but that is currently set at little more than £100 per week. That is not a sum that will finance a very pleasant retirement and can leave people in real trouble if they fall ill or suffer damage to their homes or an expensive appliance.
There are a lot of unforeseen events that can set you back financially in retirement and you must have a sufficient income to cope with them.
Contact professional advisors with experience and a strong reputation to start planning for retirement now.
