Common mistakes people make with their retirement money

Whether you’re in your twenties and just starting out, or in your sixties and on the brink of retirement, you want the best possible returns for your nest egg. But knowing where to start or what to invest in can be intimidating and overwhelming, and often we make these decisions by emotion and not by logic. 
It is recommended to consult a financial planner when it comes to retirement planning. They have the knowledge and expertise to guide you in the right direction and they are not making emotion-based decisions when it comes to your money.

No matter how old or at what stage of your career path you are, try to avoid these common mistakes regarding retirement planning.

•    Investing in things you don’t know about – You wouldn’t attempt brain surgery if you were not a qualified and experienced surgeon, so why attempt investing in things you  know nothing about? A “sure thing” investing tip from you plumber or your hairdresser shouldn’t be the basis for your retirement planning. 

Following the latest investing trend or pouring your money into whatever is “in” right now, could lead to disaster. Do your homework first and consult your adviser before pouring money into investments.

•    Betting on stock – unless you are a professional experienced stockbroker, stay away. Don’t gamble with your retirement money. If you lose it on bad stock choices, there is no bail out. If your fingers are itchy for some stock speculation, let your adviser help set up a trading platform for you in which you can play around with some extra savings other than your retirement.

•    Investing all your cash in risky investments – we all want maximum returns on our retirement investments but, putting all your eggs into one basket of high-risk investing is asking for trouble. The idea is to preserve and grow your retirement nest egg. It’s all about balance. You need risky investments but also stable secure investments to protect your wealth. Diversification is the key word here. It spreads your risk across multiple economic regions and asset classes whilst giving you maximum return, but also protects your retirement.

•    Investing your cash in only safe investments – It also applies to safe investments. Current market volatility has left most of us shaken and it is instinct to protect wealth and look for low risk investments. 

Placing all your retirement funds into low-risk funds will protect your money, but you stand to lose a small fortune in returns which you could have earned on higher risk funds. It’s the proverbial shooting yourself in the foot scenario. Again, it’s all about having a balanced portfolio. 

Not taking advantage of your employer’s savings plan – this is a no brainer. You might be fortunate to have your employer match whatever you contribute to your pension fund. It’s free money. Someone else is investing in your retirement. It is advantageous to allocate the maximum % allowed to your pension fund if your employer is going to match your contributions. More contributions mean more money when you retire.

•    Putting too much money into real estate deals – Real estate is always a good investment. It grows your financial portfolio and you could get passive income in the form of rent. But again, it’s all about balance. Putting all your money into real estate, ties up your cash flow and fluidity. And like any investment, it could perform badly if a development fails or property values decrease, causing you to lose money.

•    Overlooking fees and costs – this is probably the biggest costly oversight we make. We look at good funds without considering the fund fees and admin costs. It may seem small, but over 30-40 years, could cost you tens of thousands or possibly even hundreds of thousands. Always check the fund costs and fees and get your adviser to compare fees on the funds you prefer.

•    Being unrealistic about your financial needs – it is surprising how ignorant we really are when it comes to our finances. Many think they are ok for retirement without knowing what they have saved up. You need to have realistic expectations about the kind of lifestyle that you want to lead in retirement. Only once you have clear goals and expectations, can you plan properly. – thebalance.com

Your financial adviser will help you create realistic expectations and get a plan in place, so you have peace of mind about retirement. info@devere-group.com

Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere adviser for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.