Terri Ramsey Beavers Your retirement is something of a mythical thing that you can only look towards and dream of. Imagine days where you don’t have to feel guilty for not working. You can relax and do whatever you want with your life, ahh, bliss!
Unfortunately, you need to have money to fund your retirement. When you no longer work, your source of income dries up, so you depend on years and years of saving to help you out. This is where the idea of a retirement fund kicks in, usually in the form of a combination of savings and a pension. Your savings can be used as and when you please, while a pension scheme can be paid out as a monthly annuity, meaning you get a chunk of it every month for the rest of your life.
As such, you need to think about saving for retirement, which brings us to today’s topic. What mistakes do people commonly make when saving for retirement?
Not saving
The biggest mistake is to have absolutely no pension plan or retirement savings ideas in place at all. You happily breeze your way through life, spending money as and when you please, then reach retirement age and wonder where all your money has gone. Your meager savings are nowhere near enough to fund the golden years of your life, and there’s nothing you can do about it. The only real option is to get a part-time job, meaning you work through retirement!
Only relying on a workplace pension
A workplace pension – or employer’s pension – is a scheme set up by the company you work for. Effectively, they create a pension pot for you, setting aside a portion of your monthly wages into it. At the same time, they pay a share of their money into the pot, which can often match the percentage of your wages. It’s a way of saving for retirement, but if you click here you’ll see that many professions simply do not provide good enough pensions to solely rely on them. Instead, it’s always recommended that you look for a private pension on top of the benefits you get from work, maximizing your retirement savings.
Starting too late
If you only start saving for your pension when you’re in your 40s, you’ve only got just over 20 years’ worth of saving. Considering you will likely have your first job in your twenties, you’re missing out on an extra 20 years of saving. So, think about how much money you’d save from your 40s into your 60s. Now, double that. That’s basically what you’d get if you simply started saving a bit earlier! Don’t leave it too late, start saving as soon as you can. This mainly applies to self-employed workers who don’t have a workplace pension so have to set a private one up themselves anyway. The longer you leave it, the less money you’ll save.
It’s important that you learn these three mistakes and avoid making them yourself. If you feel like you’re already making a couple, then take action right away!