One of the most exciting parts of ending our working years is the ability to live the life we have always dreamed about. Unfortunately, many South Africans – approaching their retirements – are realising that they have not got the retirement fund they need to support their ideal post-employment lifestyle. Fearing for their financial futures, South African retirees are worried that they will have to count every cent they spend.
Of course, there are many different approaches to funding your retirement life, all of which have their pros and cons that need to be considered. Whatever your approach, there are several common retirement mistakes that need to be avoided at all costs. All the while, ensuring diligent saving habits and effective pension fund development over the course of your career.
Here are the five most common retirement mistakes you need to avoid:
- Retiring too early
One of the most common mistakes made by older South Africans is the assumption that we can retire at 55 and go about our retirement life in style. The fact is that retiring at 55 is just not feasible in a South African context for most of us. The vast majority of us will have to keep working well into our sixties and maybe beyond. Whether you are a cautious spender or diligent saver, the amount you can afford to put aside will, simply, not be able to cover the lifestyles you want to lead for as long as we need. Life expectancy increases every year and we will need (on average) ten to fifteen years more years of retirement funding than expected. Unfortunately, retiring early is a privilege reserved for very few and cannot inform our retirement plan decisions.
- Too dependent on investment and cash accounts
The desire to place your money and savings into regular accounts is a terrible mistake. Savings accounts, like money market and investment accounts, are a tempting short-term solution to where and how to keep our savings safe while growing. These are a sensible pitstop on your savings journey, but cannot be the final destination. These accounts are too unstable and inconsistent for a retirement fund due to volatility in the equity market. Of course, these accounts will continue to provide useful tools and opportunities to make growing your retirement fund a successful endeavour. However, these will never replace the classic retirement annuities, preservation funds and pension plans that continue to offer safe and secure access to your savings for your entire retirement, without the risk of outliving or losing your money.
- Thinking you have more disposable income than you do
There are many romantic notions about what our retirement life might look like, especially when we see a large lump sum in our accounts. Travelling the world, spoiling loved ones, climbing mountains and buying dream cars are all valuable and exciting ways to spend your money, but are they within your retirement budget? They might not be. It is important to take note of exactly how much disposable income you have access to and what you can afford to spend on romantic notions. Most South Africans are seduced by the significant amount of money that you have on hand after retirement. However, it is important to ensure this money lasts and you can pay for your retirement without stress and room for a little extravagance.
- Failing to adjust your post-retirement lifestyle
This is probably the most common mistake made by soon-to-retire South Africans, according to financial experts, insurers and bankers. Understanding what you have available to you and what kind of lifestyle you intend to lead are important steps in planning your retirement; however, these two factors will need to account for each other. Basically, we need to be able to afford our post-retirement lifestyle. With all the time, money and freedom that comes with retiring, it can be so tempting to spend extravagantly and explore the world. A reasonable wish for any new retiree. This is hard-earned and well-deserved, but needs to be approached with caution. It may be hard to hold back in your sixties, but you will be grateful for the additional income in your eighties and nineties.
- Starting too late and saving too little
There are two simple steps that any working adult can take to help ensure their retirement will be comfortable and easy: starting early and saving more. It is understood that we want to spend as much as we save from our salaries, but this is not always the best choice. Starting in your twenties and saving more towards your pension could be the difference between your dream retirement and a steep drop in lifestyle standards. By becoming more diligent in how we save money and add into our pensions, we can become more and better prepared for our next life stage. Most retirees say that their retirement years approached them faster than they expected and should have prepared more. Get ahead of the curve and start saving as much as you can, as soon as you can. Your future retired self will thank you!
Deciding where you are going to live in your retirement years is an important and difficult decision to make. Whatever your medical or lifestyle requirements, Manor Retirement’s beautiful and bustling retirement communities have a range of senior living options to make living your retirement years easier and more comfortable.