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Three Common Retirement Mistakes You May Be Making

Three Common Retirement Mistakes You May Be Making

People who save money for retirement do so in hopes that their post-working years will be enjoyable and relaxing, as they have worked hard throughout their careers. And while this is achievable by making the necessary preparations and planning accordingly, your retirement can be derailed by mistakes that you can easily fall prey to. Remember, these pitfalls can befall people as they near or enter retirement so it would be best to be as knowledgeable as possible so that you can avoid making costly mistakes. 

To help you out with this, we thought it would be useful to put together a brief article discussing the most common mistakes that people make when it comes to retirement. If this is something that you’re interested in learning more about, read on as we list down three common retirement mistakes that you may already be making.

Investing Like You’re Still Earning from Your Job

When nearing retirement, you need to adjust your mindset about your investments. For the past few decades, you may have been aggressive, taking calculated risks that more than once helped grow your money. That approach may have become so ingrained that it’s now a habit that’s hard to break.

In a worst-case scenario, you could find yourself in retirement, still struggling to make ends meet. Let’s imagine a scenario in which you are reliant on investment income to fund your lifestyle. If we hit a recession, the market could take a plunge, meaning your account balance would take a double blow. If that happened, you could find yourself going into retirement with no savings or pension to rely on.

Failing to Be Proactive with Your Portfolio

Some people mistakenly believe that investing is all about making money without actually having to do anything. And while it’s entirely possible to take a lax approach to investing, you’ll want to be proactive if you’re setting yourself up for a comfortable retirement.

A good way to be proactive is to monitor drops in your portfolio. Work with your financial professional to understand how much you could lose in the market and whether your retirement plan will be able to support you for 30 to 35 years. For example, if the market dropped 50%, you might only sustain a 15% loss, and then you and your adviser could decide whether you could tolerate such a loss.

Ignoring the Tax Year

It could make sense for you to delay taking income from your pension fund if you’ll be reassessed in the next tax year and will be paying tax at a higher or additional rate. Delaying your income could mean that you pay less tax overall. This will also allow you to plan your income in the new tax year, which can help you avoid paying more than you have to.

Conclusion

We hope this article proves to be useful when it comes to helping you avoid costly mistakes. If you are currently making some of these mistakes, do know that there is still time to pivot and recover. Be sure to keep everything we’ve discussed here in mind so that you can well prepared for retirement. 

Wills and Probate is here to help inform you of the most important decisions you make in life, especially concerning your wealth and finances. Whether you need help with inheritance tax, power of attorney, or retirement planning in the UK, our team of legal professionals are here to assist you. It’s never too early to plan your future, so you better start doing it today. Contact us to set up a free consultation.