Retirement is not what it used to be. Historically, someone would retire in their sixties and receive a state pension, a one-off tax-free lump sum and a private guaranteed pension, for life.  

With many final salary pensions being wound up or being replaced by defined contribution alternatives, this has pushed people into planning their own retirement without providing them with the advice and support to explain how to do so.  

Therefore, many people make critical mistakes when planning for their golden years. These errors can cause you to exhaust pension assets or even die at a ripe old age having not spent enough.   

Here are some of the biggest retirement planning mistakes people make and how to steer clear of them. 


Not Knowing Your Full Financial Picture 

First, many individuals do not have a complete picture of their assets, income sources, debts and likely expenditure as they approach retirement age. Your financial position is more than just your workplace pension. You need clarity on: 

  • How much your State pension/s will be.  
  • The values of all defined contribution pensions. 
  • The anticipated lump sum and income for any final salary pensions. 
  • The values of all other investments. 
  • Your plans for Buy-to-let properties, rental profit.  
  • Likely regular and adhoc expenditure in retirement.  
  • Potential healthcare or long-term care costs 
  • Mortgages, loans, credit card debts. 

Without an accurate picture of the above, it is impossible to create a retirement plan nor test whether it is achievable. Tracking down old pensions and records can be tedious. An adviser can do the legwork for you, establish your retirement objectives then analyse your situation to ensure that those objectives can be fulfilled. 


Incorrect Retirement Age Assumptions 

Many workers assume they will retire at an exact age like 65. Timing often changes due to health, family needs, work enjoyment and more. One suggestion is to retire in Spring or Summer, when you can enjoy good weather and be more active.  

Your projected retirement age is a significant factor in determining the investment values you have and the amount that is required to sustain you for a long retirement. Retirement planning before retirement can help determine when you retire and is often a (positive) shock for many.  


Not Enough Contributions Early On 

Saving for retirement is a lifelong process, but it is easy to delay when starting out. Student loans, first homes and young families can strain budgets. However, starting contributions in your 20s and 30s is ideal. Early savers benefit from a far longer period of tax-deferred compound growth in their pensions. 

For example, saving £300 per month from age 25 to 35 will generate a fund of significantly more by age 65 than saving £300 per month from 45 to 65.  

Many employers also offer to match increased pension contributions and you may also be able to exchange personal contributions in favour of larger employer contributions.  


Your Home Can be A Retirement Asset 

Owning your home outright seems attractive for retirement. However, it is often your highest value asset. By downsizing or utilising equity release, you can realise capital that you can put towards your retirement. This is an area where specialist advice is key.  


Cashing Out Pensions and Investments  

If service is less than two years, you may be able to request a refund of contributions, depending on the type of scheme your previous employer provided. It is also tempting to encash investments or reduce ongoing contributions. 

Instead, accept you are likely to have multiple pension policies and consider consolidating them as you go. This really reduces the amount of time spent managing multiple policies.  


Withdrawing Too Much Too Soon 

Once retired, a common mistake is withdrawing too much from investment accounts too soon. People tend to spend heavily on travel and bucket list activities in early years of retirement. Work with your adviser to develop an efficient and clearly defined strategy that matches your retirement objectives.  


Recognising the Real Risks to Wealth 

The media focuses on the highs and lows of the stock market and the economy to get extra “clicks” and this can worry retirees.  

When accumulating assets, a prolonged period of lower than anticipated growth, followed by high growth, can still meet your target. In retirement, withdrawals can exacerbate low growth, thus the importance of regular reviews of your financial plan.  


Not Addressing Long-Term Care Fees 

Care fees, whilst extremely high, do not tend to be required for many years. Work with an adviser to evaluate policy options, costs, and strategies to fund potential care needs. Failing to account for healthcare costs is a major oversight that can quickly drain retirement savings. 


Ignoring Inflation and Rising Costs 

It is easy to project future retirement spending based on today’s expenses. But costs inevitably rise over time due to inflation. The price of goods, services and housing expenses will escalate over your 20-30 year retirement. £40,000 a year today will not have the same purchasing power even 5-10 years from now. 

Plan for a sensible level of inflation. You can either inflate future expenditure or, better, deduct inflation from growth. By working in “today’s money” as it is termed, expenditure in ten years’ time still makes sense. An adviser can stress test your financial plan with specialist software, to ensure that you do not come up short. 


Choosing the Wrong Pension Options  

There are many choices and factors around pensions that people often get wrong: 

  • Taking pension benefits too early or leaving funds untapped longer. 
  • Failing to provide adequately for a spouse after death.  
  • Selecting the wrong payout structure when considering the mix of guaranteed and investment-linked income. 
  • Not nominating beneficiaries to inherit pension assets in the event of death.    


Understand all options fully and make the right choices with guidance from your adviser. The decisions you make during the “fragile decade” (starting five years before retirement) can have a positive impact upon the next two to three decades.  

Retirement finances do not have to be complex. Our qualified team at Fiducia Wealth Management helps clients avoid all these common pitfalls and more. We take retirement planning worries off your shoulders so you can enjoy your future. Contact us today to get started on a smarter retirement plan.