6 Mistakes to Avoid During Retirement

by Alex Feldman

March 28, 2019

On average, we spend 20 years or more in retirement. However, many people fail to safeguard themselves against retirement, leaving their pensions until the last minute to plan.

You wouldn’t put off saving for a home deposit, and so why wait to save during retirement? Here is a list of the most popular mistakes during retirement and how to avoid them.

 

  • Buying Annuity with Pension Provider

 

Although an annuities’ tax-free growth can be a positive step for retirees with additional money in the bank, over 80% of people could have got an improved deal on their annuity. Many annuity investors buy the first annuity that their pension provider offers them. However, it is known that the best deals can be reached on the open market, where prices are more varied.

 

  • Waiting to Save Until Retirement

 

We are all heading towards retirement at the end of our working life, and for many, this has been the goal since they started work 40 years ago. Yet, many people still wait until only a few years before retirement to start saving. It has been recommended that you need 70% of your pre-retirement income to live during retirement, and, to sustain this for 20 years, you need to start saving now.

 

  • Focusing on the State Pension

 

The state pension is currently £6,025, which may be far from what you will normally be earning as a working person. However, many people believe that this can support them throughout retirement. Additionally, the state pension age is set to rise to 67 by 2028, and so if you want to retire before your golden years, you should not rely on your state pension income and should set up private pension schemes to support you and your family.

 

  • Releasing Home Equity

 

Your home has supported you throughout life, and many people believe that it can continue to support them through releasing equity in their retirement. However, this means that your family will not inherit your home when you die, among other negatives that you should take into consideration before deciding on this option.

 

  • Forgetting to Track Your Pension

 

When opening pension schemes, many people do not remember to check the growth of their pension until it comes to retirement. However, many pensions do not grow at the rate that you would expect. You should also check your pension to see if there were extra fees that you did not take into consideration and to see if it still matches your current circumstances.

 

  • Avoiding Workplace Pension Schemes

 

Over 9.5 million people are now enrolled in workplace pension schemes due to new auto-enrollment laws. However, many people choose to opt-out of these schemed to secure more money in the short-term. Investing in your future now though increases the amount of money you will gain throughout your life, as employers contribute 0.8% of their gross earnings into employee’s pension schemes.

Although many people make mistakes when it comes to their retirement, there are many advice services that can help you to succeed. These include Portafina, and if you want to find out more and read more advice on having a smooth retirement, follow their social media accounts on Portafina’s Facebook, @portafina_uk, LinkedIn and YouTube.

Disclaimer: The above information is not financial advice. For any financial decisions you need to make, please ensure you talk to a qualified financial advisor.