5 Retirement Mistakes To Avoid

Five Retirement Planning Mistakes

First Published Date : April 11, 2012

Unexpected global economic fluctuations and downturn have made Canadians rethink and reevaluate their retirement strategies. And in a time like this, a mistake can be irreversible and can go a long way. The best suggestion? Avoid mistakes in the first place. Today, I will look at some common mistakes to avoid.

Not Planning Early and Setting Goals – If you have just joined the workforce and happen to bump into this article – congratulations! A lot of us make the mistake to plan and set realistic goals early enough to achieve it. You should have a clear picture of when you want to retire, how you would like to retire, how much income you need to support yourself, where you would like to live, etc.

Investing and Diversifying too Conservatively – If you are too conservative, you may keep all your money, but it is almost guaranteed that you will lose out to inflation. Technology has brought so many modern day investment vehicles (one example is ETF) to regular investors these days, which was unimaginable just 5-10 years ago. You need several considerable investments with a moderate diversification.

Misunderstanding Expenses – Don’t make the mistake of overestimating or underestimating your retirement needs. Make a list of all your expenses and try living on that before your actual retirement. Keep in mind that some expenses will gradually drop out once you retire.

Misunderstanding Debt Management – Don’t look at debt management the traditional way. One simple example is paying off your mortgage or investment loans ASAP. If you have investment loans that earn you more than the interest you pay to carry the loan, it may not make sense to pay off investment loans or mortgage on an accelerated pace as you can earn more money if you use the extra payments towards investments that have higher returns.

Misunderstanding Tax Consequences – You can re-energize your retirement assets and income if you go through proper tax planning. Optimized, tax efficient income retirement assets will last a lot longer than those without proper tax planning.
The best way to handle all these I mentioned above is to educate yourself on various retirement aspects. Although retirement planning looks black and white on the surface, it is complicated and it is unlikely that you will know all the ins and outs by yourself. I always recommend consulting a retirement professional to discuss your unique situations.