5 Biggest Pitfall to Avoid When Planning for Retirement
5 Biggest Pitfall to Avoid When Planning for Retirement. While thinking about retirement, one can be tempted to believe in the idea that it’s just a matter of saving for a while and the money will be there when need it. It’s not as simple as that. Experts advise us to plan ahead, estimating what expenses we might have in the coming years. If you’re planning for retirement, here are 5 things you should avoid:
1. Not starting planning early
The biggest pitfall to avoid is not starting early. It’s never too late to start saving for retirement. The earlier you start, the more time your money has to grow through compounding interest.
2. An unexpected loss of income is another common pitfall to avoid when planning for retirement
A sudden loss of income due to illnesses is one of the most common and unforeseen ways to lose retirement income. This can be especially devastating if you had planned on relying on a certain monthly income for your retirement. It’s important to be prepared for this eventuality by having a back-up plan in place, an income protection plan.
3. A lack of diversification in your portfolio can be a pitfall to avoid when planning for retirement
When you are planning for retirement, it is important to have a diverse portfolio that can provide a more stable source of income for your needs. Investing in stocks and bonds is another way to increase the number of potential sources of retirement income. You want the portfolio to be diversified with both guaranteed and non-guaranteed products so you can minimize risk.
4. A lack of resources and proper knowledge is a pitfall to avoid when planning for retirement
The lack of resources and proper knowledge in retirement planning will cause many individuals to end up with a lifestyle not as good as they expected. They may even end up worse off than before retirement. The situation can be avoided by having a sound retirement plan that includes all the necessary aspects, such as financial security, mental health and emotional well-being.
Retirement is a time of rest and relaxation for those who have been working hard throughout their lives. Achieving this requires making sure that you are financially secure enough to maintain your desired lifestyle.
5. Not having a retirement plan and sticking with it
Not having a retirement plan in place can be a big mistake that many people make. It may seem like you will never need to stop working, but there will come a time when you are no longer able to do the work and it will be too late. So what should you do now?
Firstly, evaluate your current savings to find out what you will need in the future, set aside a comfortable amount of your income every month for your retirement plan. Know when it is time to start taking out retirement money and for how long.
Secondly is to select suitable product/s to meet your retirement needs. Growing your wealth through investment (non-guaranteed) and/or endowment (with both guaranteed and non-guaranteed) and stick with it.
One Last Thing
Retirement planning is about having a product or a plan that will gives you a stream of guaranteed income when you retired, no matter where you are, what you do or what condition you are in. While planning it should include your time horizons, expenses of your future lifestyle needs, adequate medical insurance coverage. Rule of thumb is saving at least 20% of your annual income. Therefore, if you save lesser or start your retirement planning too late, you will not be able to reach your financial freedom goal at your retirement age. Retirement planning takes time, please seek help from your friendly financial consultant to help you with your retirement planning when required, or contact me for a holistic Insurance and Financial Planning.
Note: Opinions expressed are solely in Mr. Chan Kong Meng’s personal capacity and neither express the views or opinions of Prudential nor represent any professional advice in Mr. Chan Kong Meng’s capacity as a PACS representative.