MAKE RIGHT CHOICES
Avoid making decisions which could force you to work beyond retirement. Limit the amount of debt you take on over your working life — and clear that debt as early as you can. Most banks offer mortgages which can be repaid up until the age of 70 — don’t be tempted to take out such a mortgage because unless you clear it early, you’ll need to work until you’re 70 to pay your loan off. Instead, have your mortgage paid off by the age of 65. Topping up your mortgage can be a big mistake — particularly if you do so close to retirement. Resist the temptation or pressure to top up your mortgage so that you can give your child a deposit towards their first home.
Only top up your mortgage if you have a real financial need to do so and are sure you can clear it by the age of 65. Be aware that unforeseen circumstances, such as an illness or redundancy, could see you struggle to repay the loan.
Having children late in life is another reason people often have to work into retirement. Should you have children in your late 30s or early 40s, your children could still be in college when you retire. It could cost over €40,000 to send one child to college for four years. To avoid having to work into retirement to pay for college bills, start saving for your child’s college education once they’re born — or even before that. Otherwise, you may have to borrow to fund the cost of your child’s college education and such loans could easily follow you into your late 60s.
Don’t overstretch yourself financially when supporting your children — even if it is to help them get onto the housing ladder or to overcome a financial difficulty. Rather, encourage your children to be financially independent and responsible and to save for big-ticket items themselves — so that any support you provide doesn’t put you under financial pressure in your retirement. Be careful about acting as guarantor for a mortgage as by doing so, you could be called on in retirement to repay your child’s mortgage and ultimately you could lose your home if your child struggles to repay the loan.
Poor investment decisions or bad luck with investments could also see you worse off financially than you expected to be in retirement. So get independent financial advice if making any major investment decisions, don’t fall for investment fads, and regularly review your investments and pension to ensure they’re living up to your expectations. Be particularly careful about investing your money after you retire. Don’t make hasty or ill-informed investment decisions — and don’t put your money into high-risk investments. “When investing post-retirement, if it looks too good to be true, it probably is,” said Paul Kenny, the former Pensions Ombudsman who is now a course leader with the RPC. “High potential rewards generally carry high risk.”