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Retirement Planning Mistakes and How to Fix Them NEW CI Main

Retirement Planning Mistakes and How to Fix Them

People are working longer, living longer, and retiring later, so it’s no surprise that making important financial decisions can continue well into one’s sixties. However, this decade provides little room for error, so it’s crucial to avoid mistakes in your financial planning. 

That said, you still want to be able to enjoy your life as you plan for your retirement. Here, we’ll show you how to plan wisely and which retirement planning mistakes to avoid, so that you can get the most out of your retirement goals.

Not having a long-term plan

Many retirees fail to effectively plan for their future healthcare needs because of gross underestimation of these costs. Although they may be in relatively good condition, many people in their sixties fail to adequately plan for the day when their health no longer serves them. 

Even though we are living longer because of advances in medicine, many pension plans have not adapted to the financial realities that this newfound longevity entails. 

As part of their retirement preparations, pre-retirees should make plans for the possibility that they will need full-time caregiving in the future. Failing to do so can leave close friends and family members with a financial burden and make you financially vulnerable during a difficult moment.

Start thinking about frail care, home care, assisted living, or perhaps moving in with an adult kid as soon as possible if you haven’t already. Find out how much money each choice will cost and how well it will fit into your present budget. 

Even if you’re in good health and feeling great in your 60s, it’s better to be safe than sorry and put together a long-term care plan just in case. Share the plan’s specifics with your grown children and other loved ones so they may rest easy knowing you have a solid strategy in place.

Not investing sooner

If you’ve been dutifully saving your hard-earned money, you know how difficult it is to build wealth over time. Investing in stocks can help you achieve your savings goals faster by allowing you to earn higher returns on your existing funds.

When you buy a promising stock, your original investment grows in tandem with the value of the company’s assets, allowing you to expand your savings and attain your savings objectives more quickly. 

This is an excellent way for South Africans to achieve their financial objectives, which is why stock investment is so popular. Unfortunately, many South Africans are denied access to stock market prospects because there was previously no way to invest without a bank account and a specific minimum deposit.

When you invest with OTT 4 Me on the EASYInvest platform, this is no longer the case. Now, cash-based South Africans can finally participate in the stock markets and add their money to the possible rewards. 

Users can deposit funds into a Momentum unit trust through the EASYInvest platform. A unit trust allows thousands of people to participate in large-cap securities collectively. Momentum selects equities for this trust based on its investors’ common financial goals.

Momentum will just reinvest the funds if these equities underperform. Momentum evaluates the firms in which it invests based on their performance.

Not cashing in on your assets

Many retirees, even after their children have moved out and started families of their own, choose to remain in the family home out of sentiment rather than to save money. Consider making the move to a smaller house or flat as soon as possible if it is part of your long-term plan to retire.

First, in the years leading up to retirement, the expenditures of maintaining a larger property may be too much of a drain on savings that could be better allocated elsewhere, such as a long-term care insurance policy. 

Second, if you run out of money in retirement, you may have to sell your home at a time when the market is down, reducing the amount you stand to gain. 

Maintaining a large property is expensive because of things like higher rates, higher energy use, the price of enhanced security, the expense of domestic and garden services, and the cost of basic maintenance and improvements.

Ask your financial planner to create hypothetical scenarios that compare the results of selling the family home in your 60s with selling it in your 80s as you design your retirement strategy. Customers are typically provided with useful insights from this type of investigation.

Giving your assets away

You may feel compelled to start giving your adult children a portion of their inheritance while you are still alive if you have saved adequately for retirement and intend to leave a financial legacy to them. 

This method of estate planning is prevalent due to the current economic climate and rising living expenses, but it is not without its risks.

To fully understand the assets in your estate, the liquidity in your estate, and the tax and CGT implications should you realise an asset, you should have your advisor draught a complete estate plan for you before making any gifts. Once you have a firm grasp of the big picture, your advisor can create a variety of scenarios to illustrate how your estate plan and retirement plan will be impacted by gifts made during your lifetime.

Frequently Asked Questions

The single biggest financial regret of many retirees is not having a savings plan in place sooner.

Investing in stocks is a solid and proven method of growing your wealth over time as an investment you can use in your retirement.

Yes, you can invest in a unit trust overseen by Momentum on the EASYInvest platform. You can add to your investment using cash with an OTT Voucher.

For many people contemplating retirement, healthcare costs are right up there with concerns about having enough money to last.

Pre-retirement, early retirement, mid-retirement, and late retirement. Although not true for every individual, these stages can help you envision your financial planning and lifestyle needs more effectively.

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