When financially preparing for retirement, many of us may experience a mismatch between the plan and the reality. Here are five common retirement mistakes that can jeopardise your retirement plan and how you can avoid them.
Retirement Mistake #1: Procrastinating
When you are still in your 20s or even 30s, retirement may seem too far away in the future to think about. Because of this, we end up putting off planning and saving for retirement. Many of us, especially those who are still young, may opt to delay contributions because of other short-term considerations.
What many fail to realise is that it is easier to contribute to your retirement plan when you still have very few financial responsibilities. It may be more difficult to save for your retirement when you are already supporting children and aging parents, and paying for a house and a car.
Moreover, the earlier you start contributing, the more time you have for compounding to increase your money. Last-minute contributions have less time to compound.
Retirement Mistake #2: Putting your children's financial health first
It is quite common for parents to sacrifice their own financial health to help out their children. Of course, every parent wants the best for their family. However, if this comes at the expense of your retirement plan, try to find other ways to help out.
Putting your savings on hold to help your children pay their rent, for example, can set your retirement savings back by years. One of the best ways to financially help your children is to ensure that you can be self-sufficient during your retirement years. This means that you will not have to rely on them for financial support.
Retirement Mistake #3: Underestimating the amount of money you need to save
Today, Singaporeans are already enjoying a higher average lifespan. This means you need to plan your retirement even more carefully as to not outlive your savings. One way to find out how much to save is to evaluate and to describe your ideal retirement. Try out The New Savvy's own Retirement Calculator to find out how much you need to retire.
According to a Manulife survey, investors expect their retirement expenditure to be 64 percent of their current expenditure. In reality, however, retirement expenditure may even be higher than their current expenses.
Retirement Mistake #4: Neglecting your insurances
As you get older, you may need to allocate more money for your healthcare. It may take only one major illness to wipe out your savings. As such, it is important to be know exactly what your insurance covers for you. A basic Medishield can help you offset hospitalisation bills in government hospitals. From this type of insurance, you can upgrade to other private integrated plans with better coverage.
Retirement Mistake #5: Overestimating your ability to work during your retirement
According to a Manulife survey, 54 percent of investors expect to continue working during retirement. On average, Singaporean investors expect to continue working nine years into their retirement, until the age of 70.
However, a research reveals that the levels of elderly labour employment are well below the survey findings. As you get older, you may become more selective about the kind of work that you are willing to take. You may want to take a job that is flexible, and related to your interests. Because of possible elderly-related health issues, you may also want to choose a job that is less physically demanding.
Find out how much you need to retire with our Retirement Calculator!
Avoid making more retirement mistakes, head over to our Retirement section.