Mistakes are part and parcel of life, and there is nobody who can progress without them. However, there are some mistakes that can be so weighty that they carry long-term effects which are difficult to get rid of.
Retirement planning mistakes are one such thing. When you inch closer to the age of retirement, it is important that your retirement plan has already been set in action. And while the first step to this is to get hold of the best pension advisers Bournemouth has, another important step is to know the most common mistakes people make in their retirement planning and see if you are doing the same.
Here are the top four mistakes people make while planning for their retirement...
1. Not Knowing How Much Income You Need in Retirement
Many people are blissfully unaware of the cost of retirement. If you ask them how much money they think they would need to maintain their current lifestyle in retirement, they will have no idea. This can have a bad effect because when you don’t have a clear idea of the amount you will
need in your retirement, you will either underestimate it or overestimate it.
In most cases, people tend to underestimate the cost of upkeep during retirement. This is because they don’t put in the inflation factor. Typically, you would need about 80% of your annual income in ylour retirement as well. And this is not a hard and fast rule, in many cases, it may even be more. When people underestimate the cost of retirement, they run into bad financial problems during retirement. This is why you should get in touch with the pension advisers Bournemouth has, and discuss your projected pension income and costs with them.
In the rare cases where people overestimate the living cost in retirement, they are likely to set up unachievable financial targets for themselves and get discouraged. This is why it is important to have a realistic idea.
2. Not Calculating Healthcare Costs
During the early years of retirement, people spend most of their income in travel and entertainment, however as age progresses, healthcare soon catches up and this can be particularly expensive. The biggest mistake people make is to not factor in the big healthcare costs they may have to pay. According to the pension advisers Bournemouth, over the years these healthcare costs are increasing, so when you jot down a pension plan, it is important you put in this factor.
3. Taking Loans From Retirement Accounts
It is very tempting to invest in big choices. And often, when people don’t have money for these investments, they keep on taking loans from their retirement accounts. This is a very big mistake that can cause you much financial distress in your vulnerable years. Most of the times, people are not able to pay back these loans and they end up with a less income than they thought. Or at times, they have to totally opt out of the retirement plan because of these loans.
Even if you are able to pay back the money, it will be a bad choice, because the money you pay back will not grow anymore. When you withdraw an amount, you lost the opportunity for that money to compound and grow into a bigger amount.
4. Becoming Overwhelmed by Choices
And finally, with so many choices out there related to pension plans and investment plans, it can be overwhelming. Many times people get petrified and fail to act. Or act in a haphazard manner. According to pension advisers Bournemouth, this is one of the biggest mistakes. Instead, get in touch with the professionals so they help you take the right action at the right time.
These are some of the top mistakes people make in their retirement plans. Better avoid them!
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