August 29: Retirement Mistakes

August 29, 2024

Some mistakes to avoid on the road to retirement

Our parents tell us that every mistake we make is also a learning opportunity – by doing the wrong thing, the path to the right thing is illuminated for us.

With that in mind, Save with SPP took to the Information Superhighway to see what retirement whoppers people have experienced, and maybe, what they learned from those mistakes.

CTV’s Christopher Liew suggests that “starting too late” on retirement savings and planning is a top mistake to avoid.

“If you want to build a substantial retirement fund, time is your greatest ally. The longer your retirement savings have to grow and earn compounding interest, the more you’ll have when it’s time to step back and start your retirement,” he writes.

Another mistake to watch out for is “failing to diversify your investments,” he adds.

“Putting all your retirement eggs in one basket can be a risky game. Diversification is key to balancing the risk and returns in your investment portfolio. Failing to diversify can expose your retirement savings to market volatility and specific sector risks, potentially derailing your long-term plans,” Liew notes.

Spread your retirement investments across “different asset classes such as stocks, bonds, and cash equivalents,” he suggests.

A third mistake Liew identifies is “underestimating your retirement expenses.” It’s hard to set a savings target if you’re not clear on what your expenses will be once work is done, he continues. “Retirement often brings its own set of financial demands, ranging from healthcare costs to leisure activities. Underestimating these can lead to financial strain, potentially forcing you to dip into savings faster than you anticipated,” he writes.

The Bellwether Investment Management blog provides a few more things to watch out for.

“Avoid taking on new debts,” the blog advises retirees. “This one may seem obvious, but it should still be addressed. Do not take on new debts. By the time you reach retirement you should have already settled them. While everyone is under different circumstances and you may already have open lines of credit, what is ultimately more important is not incurring new ones,” the blog advises.

“In a study published by Statistics Canada that investigated senior families and their finances, there has been a startling pattern beginning to emerge. Between 1999 and 2016, the rate of indebted families rose drastically from 27 per cent to 42 per cent. Worse yet, the median amount owed went from $9,000 to $25,000,” the blog advises.

Another common mistake is trying to do everything yourself in a complex retirement world where you have multiple sources of income, investments to draw down, more complex tax problems, all while you are getting older and a little less energetic.

Consider the help of a finance professional, the blog advises.

“Although many individuals have done well in taking care of their finances personally, there may come a point in their lives where they no longer have the desire to do so. In other cases, situations may arise where the surviving spouse isn’t familiar with the complex details of their portfolio which can lead to undue stress for their financial (and emotional) well-being,” the blog advises. Professional help is a call away, the blog reminds us.

The Motley Fool blog adds another good one.

“Not planning for longevity” is a major retirement planning error, the blog notes.

“The average life span in Canada is almost 82 years. But a decent percentage manages to live past 90, and some even farther than that. But a long life might not necessarily be a happy life if you are running out of cash faster than you run out of breath. While it’s vital that you save and invest as much as you can, planning for longevity requires taking other decisions as well, like buying a whole-life annuity to augment life-long government pensions,” the blog notes.

The Saskatchewan Pension Plan ticks the boxes on several of these concerns. You can start early on your SPP savings, and your hard-saved retirement money will be invested professionally in a diversified, professionally managed pooled fund. And if you are worried about running out of money (by living a long happy life), SPP’s annuity options deliver you monthly income for life, no matter how many candles they cram onto that birthday cake.

Check out SPP today!

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Bellwether Investment Management, CTV, Statistics Canada, The Motley Fool

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