Retirement planning is an ongoing process; once retirement starts it becomes all the more important to make wise investment decisions.
As a retiree, you need to have a clear strategy regarding how your retirement funds will be invested to sustain yourself through your twilight years. Individual circumstances differ and this ultimately informs your post-retirement strategy.
Preenay Sathu, Channel Head at FNB Financial Advisory says, “The biggest mistake, however, is not having a plan at all or assuming that the funds available will be sufficient. Once retired, most people have no other source of income and rely entirely on their lifetime savings, which may not be enough.”
A qualified financial adviser can help you draw up a plan based on your personal circumstances and avoid the following common money mistakes:
1.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. For example, if you make a partial withdrawal from your pension fund and leave the rest in a living annuity, allocate some of the money withdrawn to an investment vehicle. It is important to note that there may be fees attached to your investment. Do some research about how much it will cost you to invest and avoid any surprises.
2. Not understanding tax and retirement
Being retired does not exempt you from paying tax. For example, if you made a partial withdrawal from a pension fund and bought a living annuity, you may be taxed on the income from the annuity. Tax is something you can never avoid and it is best to seek advice about how you can minimise the tax implications of certain financial decisions you make.
3. 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. 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. Consult a qualified financial adviser who can do a thorough need analysis of your finances and develop a plan for you. Some people also believe they can tackle financial planning on their own, which should only be attempted if you are suitably qualified and have the apt skill for making financial decisions. The biggest lesson here is to seek professional assistance.
4. 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 or consider moving into a smaller property. It is important to review your budget and assess opportunities to reduce expenditure.
4. 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.
Source: FNB. Image: