Retirement is one of the most, if not the most, significant milestones in our lives that we need to prepare for. And why not? It represents one fourth of our lifetime and accounts for the very important last quarter.
Naturally, everyone would certainly aim to have a truly enjoyable harvest time, when we all have gone past our youth and our productive years. It is hoped that during those early periods when we were strong enough to work for the money, enough has been set aside for the future to let the money work for us.
Here are five mistakes to avoid relative to retirement:
- Underestimating needs. Most people wake up to the reality at retirement time that what they have set up will not last the distance. Experts recommend programming funds for at least 80% of your income before retirement to take care of your needs as a retiring couple.
- Underestimating lifespan. Believe me, data show increasing life expectancy. Where it used to be 75 years for the male, now it is 82, which means that if your preparation was only for ten years, you will be short of funds for the remaining seven.
- Underestimating inflation. Inflation is a “given” in life. As they say now, it is as sure as death and taxes. But since you cannot predict inflation, you can only rely on projecting average experience. It is safe to project at 4% but aim to adjust every now and then.
- Unnecessary spending. When retirement comes, most retirees opt for a certain lump sum. The lump sum is a very powerful temptation to splurge unnecessarily. Keep your cool.
- Unwarranted risks. After taking your partial lump sum, you have a balance that is ready for investing. At retirement time, your primary need is liquidity. You can no longer afford to go into high risks. Focus more on portability and safety than yield.
Whether you are still at your prime or already close to your time, there is always an opportunity to review your financial preparations for retirement. If you are not sure about what to do next, consult a professional advisor.
Orlando G. Javier LUTCF is a past president of the Life Underwriters Association of the Philippines and the managing consultant of OGJavierConsulting. He is a strong advocate of financial wellness and has conducted trainings on the advocacy for the last ten years. As a consultant, he conducts financial wellness analyses for free as a public service. Follow him at http://www.wealthtrigonomics.blogspot.com .
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Published in: Personal Finance