Mistakes to avoid when saving for Retirement

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A recent study reveals that the average retiree will have accumulated savings to provide a pension of only 30% of the salary they were earning before retirement.  It’s a gloomy statistic, suggesting that most South Africans are either not well informed, are not getting the right advice or are still doing something wrong when it comes to planning for retirement.  5 common retirement planning mistakes we tend to make are:

1. We start saving too late. We’re more concerned with making ends meet and paying off debt than saving when we’re young.  This is understandable, but contributions made earlier on in life often have a longer time to multiply – this is the power of compound interest.
2. We spend our retirement benefits when changing jobs. When you change your job, place your retirement benefits in other retirement funding vehicles, so the lump sum saved and invested to date is untouched. It can also grow through appropriate exposure to investment markets. You can move your fund to a preservation fund or a retirement annuity fund.
3. We invest unwisely or incorrectly during our working years. People commonly invest too conservatively for retirement. Although cash can be a safe investment in the short term, you must remember that over the long term, cash returns have not performed better than shares and they barely keep up with inflation
4. We time the stock market. We often think we can predict what will happen with the stock market and change our investments in line with this. But research shows it very seldom works and timing the markets often ends up destroying retirement savings.
5. We don’t take expert advice. To avoid making these costly mistakes, it’s better to start seeing a financial adviser during your working life and continue to get professional advice after retirement.

Adequate planning with the help of a professional is the only way to make sure you can afford a comfortable retirement, – but it’s up to you to take responsibility for your “older self”.