Common pension mistakes to avoid
After years of hard work, you deserve to enjoy your retirement. However, to put yourself in the best position, you need to plan carefully, as you may be making mistakes without even realizing.
We want to help make sure your retirement is more than making ends meet, one where you can have financial freedom and enjoy new hobbies, quality time with the family and more. So, Terry, Director here at Wealth Experts, has put together common slip-ups that you should steer clear of.
What exactly should I be avoiding?
Pension procrastination
We often see people thinking they have plenty of time to worry about retirement and don’t need to start planning now. However the sooner you start the better.
Even if you can only contribute small amounts, it will equal a larger sum over time and you will benefit from compound interest.
Not saving enough
If you do have the funds to save more than the bare minimum, then we would definitely recommend you do so. The best way to measure if you’re saving enough is by setting goals. That way you’ll have an idea of how much you’ll need to save to achieve your desired lifestyle.
Opting out of your workplace pension
A workplace pension if effectively free money, not enrolling means missing our on employer contributions. So if your workplace offers one – get yourself enrolled.
Relying solely on the state pension
The state pension is a great safety net, however if you’re after a lavish lifestyle in retirement, then this won’t be enough.
It’s important to make sure you have personal pension savings alongside this to be certain you can obtain that financial freedom.
Dipping into your pension savings before retirement
It can be tempting to dip into your pension pot in time of financial stress, however along with the obvious repercussion of reducing your retirement income in the future, you could also end up paying more income tax and losing some of your tax-free allowance.
To avoid this, we’d recommend setting up an emergency fund, so you can be prepared if you are faced with a difficult situation, meaning you can deal with that and still have the retirement you’ve always wished for.
Not thinking about pension fees and charges
Not all providers offer the same services. It’s important to check fee structures and look for options that are competitive, transparent and don’t erode your savings as the years pass.
Losing track of old pensions
It’s unlikely for you to stay in one job for your entire career, so you may find yourself with multiple workplace pensions. You need to keep track of these and consider consolidating them into one scheme so it’s easier to manage.
Ignoring pension statements
With our busy lives, many often ignore a lot in our inbox if not imminently important, however financial documents from your pension provider should be on your priority list. Be sure to actually read them and understand them.
Not reviewing your investment strategy
Markets are ever-changing, so that means the risk you’ll be exposed to is guaranteed to change. That’s why you should review strategies every few months so you can minimize risk and benefit from opportunities for growth.
You should always keep on top of your finances and make sure every decision about your future is informed.
It can be hard to navigate, so if you have any questions then please don’t hesitate to get in touch with one of our financial advisors here.
