No retirement plan is ever completely fail-safe and for some, it’s a leap into unchartered waters.  Many factors come into play and these are oftentimes out of our control, for example, you may face a health challenge, or the cost of living may rise.  To state the obvious, we don’t know how long we are going to live, so we plan as best we can and make informed decisions, especially at the time of retirement.

These are some common mistakes we have witnessed over the years and by sharing them, we hope that it may help some of you in your future retirement planning.

1.     Fail to Prepare & Prepare to Fail

Having no pension plans is a bit risky to say the least.  We all know that people are living longer and you have to think about the future and try to make provisions.  You do not want to avoid this for too long and regret not starting sooner.  It might seem intimidating at first and a task that you back heel, but once you get started you will feel so much better.

2.     Misjudging Cost of Living

This is an easy mistake to make and one that you have to consider carefully. It’s striking a balance of traveling, holidays, and leisure with the potential need for extra outgoings like care for example at a later stage in life.  You are going to have a lot more free time and this may inevitably lead to increased spending. Like the way, you notice how much more you spend when you are off work at the weekend or during holidays, but on an ongoing basis!  We also have no control over inflation and although it is gradual it can cause a shortfall that you did not plan for. 

3.     Misjudging Lifespan

You do not have a crystal ball (this is a good thing in our opinion) and you really do not know when your time on planet earth is going to be up. This being said, many people do fail to take into consideration the length of time that they will live and unfortunately there is a shortfall in income versus lifespan.

On average if you retire at 65 it’s a good idea to plan for up to 35 years.

4.     The Threat of Investment Fraud

It’s everyone’s worst nightmare, yet it happens every day.  You work hard all your life only to have your life savings wiped from beneath your feet by a scammer. 

There are things you can do to avoid this devastating crime such as –

·      Always check the FCA register before dealing with any individual or organisation

·      Only deal with a firm or individual who is FCA registered

·      If you are unsure or something seems off, it probably is.

For more detailed advice we highly recommend that you visit the FCA for further advice on how to spot a scam and avoid fraudulent investments https://www.fca.org.uk/

5.     Tax Implications

Phasing your pension in retirement by taking both the 25% tax-free lump sum and taxable income in stages is advisable and something we discuss with our clients. Spreading withdrawals over multiple tax years in this way can mean you make the most of tax allowances and avoid paying more tax than necessary.

6.     The Whole Picture

You want to analyse your entire financial situation and consider investments and savings and decide on the best way to go.  For example, it might make sense to use up your savings and cash in some investments, to begin with, rather than drawing on your pension.  This is something we would advise taking advice on.

*Please Note

The value of investments and income from them can go down. You may not get back the original amount invested.

A Pension is a long-term investment the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates, and tax legislation.