Pension: Expert gives advice on preparing for retirement
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Although experts say there isn’t a magic ingredient for a happy retirement, there are however five things pensioners often get wrong when it comes to their financial future which are easy to avoid.
When it comes to retirement most people would agree that it’s a good time to take things a bit easier.
However, to do that people will need to plan ahead as living off the state pension alone is probably not going to be enough to fund their dreams.
That’s why experts agree that one of the most important mistakes retirees make is ‘failing to plan’.
Elizabeth Dunn, who has written a book called Happy Money: The Science of Happier Spending, recommends planning ahead but breaking goals into smaller chunks to make them more manageable.
While investing in property is usually a good idea, ‘investing too much’ could put retirees at a disadvantage.
Lots of older people find themselves asset rich and cash poor later in life and it’s not always as simple to fix as selling the house.
Experts recommend striking a balance so that pensioners don’t leave themselves miserable later in life.
American professor Michael Finke said people think that they want to buy a dream home to enjoy in their later years, but what actually makes retirees happiest is spending money socializing with other people.
Don’t run down your pension – how to make your savings last as long as you do [INSIGHT]
Credit card warning: Little known credit limit rules set by banks could affect your score [WARNING]
State pension age Britons set to receive up to £300 boost this winter – are you eligible? [UPDATE]
The third mistake that people tend to make is not investing or ‘investing too conservatively’.
Although there’s no rule book when it comes to how to get it right, retirees would benefit from having a diverse portfolio.
People of retirement age might also still be earning an income and if so having more than one income stream is the key to happiness in retirement, according to another financial expert Wes Moss.
He added: “In addition to investment income, which would come from your retirement account and potentially additional investments accounts, owning a rental property is a great way to earn extra money in retirement.”
According to another financial planner Liz Koh it’s becoming more and more difficult to live off investment income and not capital.
“People are living longer and investment returns are low, so it is increasingly difficult to eke out a living in retirement by using the income from investments,” she told New Zealand website Stuff.
“Investing for income is also likely to lead to lower returns, and less tax efficiency.”
The main problem is that people just don’t know how long they are going to live which makes financial planning extremely difficult, she added.
What is happening where you live? Find out by adding your postcode or visit InYourArea
Ms Koh continued: “If only we knew how long we were going to live – it would make retirement planning so much easier!
“There are other uncertainties in retirement – such as how much money we will actually need to live on, and what investment returns will be.
All this uncertainty means that people spend their money cautiously – too cautiously.
“The trick is to be able to run down your capital at a ‘Goldilocks’ rate – not too fast and not too slow, but just right.”
Source: Read Full Article