To commit one too many mistakes during retirement planning is to sign a warrant for financial instability in your retirement years. It’s thus necessary you become aware of common mistakes that can be committed and avoid them as much as possible.
1. Not planning in detail
“Just saving enough money to live on during retirement,” is a perception common to most people but one you shouldn’t have. To adequately prepare for retirement, you need to plan in detail. How do you want to spend your retirement and where you’ll live are things that need to be considered in detail.
When you consider them as you should, you’re more likely to make the right choices such as moving to a place where living necessities are cheaper but still comfortable, and selling your current house (which is pretty big and was perfect for yourself, wives and children) and going in for a smaller but still comfortable one. Of course, we’re assuming your children are all grown and gone.
2. Comparing yourself to others
Don’t make the mistake of comparing yourself to others and thinking you’re okay. In other words, you’ll be committing a retirement planning mistake if you decide on saving only 10 percent of your income because other people are also saving the same percentage. That won’t do.
It’s better to consider in detail how you’ll be spending your retirement years; the kind of life you’ll be living and then save accordingly. In setting a percentage to save on your income, you have to consider future expenses you may incur.
3. Not diversifying your investments
If you don’t diversify your investments you’re more prone to risk and may lose a lot of money, which will be a dent in your retirement planning. It’s hence necessary to diversify investments and also, you can go in for low risk investments such as government bonds, treasury bills and mutual funds.
A diversified retirement portfolio helps in minimizing risks but maximizing returns.
4. Going in for just any retirement plan
Such a mistake can significantly wreck your retirement plans. Why not shop for the best retirement plans and also take full advantage of the retirement plan or pension scheme being offered by your employer?
Don’t go in for just any retirement plan; make use of the best opportunities available.
5. Retiring too early
Wondering how that could be a retirement planning mistake? Here is it: retiring too early means you fail to maximize your social security benefits or any other pension plan on offer by your government.
On social security, your benefits increase in proportion to how long you delay your retirement and only ceases when you turn 70. It’s hence a retirement planning mistake to retire too early.