Saving for golden years: 10 pitfalls
MANY of us invest with the hope of receiving our money back in years to come and enjoying a secure retirement. But not all of us get the opportunity to realise the full value of our investments.
Here are 10 mistakes people make when it comes to saving for retirement:
1. Not educating yourself
Many people are not aware that they need to start saving for retirement from a young age. The earlier you start saving for retirement, the better because of the compound interest rate.
2. Retiring too early
People live longer than before, which means that retirement investments need to be meticulously planned so that you don’t end up outliving your savings.
3. High investment fees
High fees erode investment growth. 10X is offering new investors six months of zero fees as an incentive to start their retirement investment.
4. Incorrect asset allocation
Many people make the mistake of making overly conservative investments.
Investors might be nervous about markets and volatility, yet it’s crucial to ensure that what you get out is much higher than what you put in.
5. Avoiding family planning
It’s important to involve your partner in retirement investment planning early on. Discuss savings expectations and future implications on the estate.
6. Active versus passive fund management
Passive funds will outperform active funds over a long period at a lower cost. Active funds try to outperform the market with higher costs and are useful for short-term investments. To beat the market over a 20–30-year period is difficult. Passive funds also help with diversification and for ensuring you get market-related returns.
7. Not speaking to an independent financial adviser
Speaking to a financial adviser will help you with planning. It’s important to look for financial expertise and to do your research when it comes to planning your retirement. Fat Wallet is an online podcast and social media community that produces webinars and blogs around financial planning.
8. Not saving enough for the future
We often tend to live beyond our means, and in our current economic climate, many people in South Africa are increasingly becoming dependent on credit for basic living costs. Taking on more debt now will negatively impact your retirement savings for the future.
9. Taking out your retirement savings too early
Try to avoid taking out of your preservation fund, as there are tax implications if you resign or leave.
10. Not taking advantage of employer retirement funds
Often, a company will offer a provident or pension fund. Try to contribute as much as you can on top of what the company contributes.