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Seven retirement planning mistakes to avoid

With the right plan, guidance and advice, you can avoid these mistakes and get on the track to enjoy your retirement dreams.

Picture a future where you are ticking off your bucket list: world travel and adventure, living by the sea, spending time with loved ones or perhaps perfecting that golf swing. The dreams you have for retirement are within reach, but to achieve them, it is important to think now to plan for the future.

At Arbuthnot Latham, we help clients achieve their retirement goals. To guide you on this journey, we have compiled some common retirement planning mistakes to avoid.

Mistake 1: Underestimating the impact of inflation

While small, incremental price increases are easy to overlook from one week or month to another, it is unwise to ignore the cumulative effect that they can have on your wealth. The impact of inflation will compound over time and quickly start to erode your purchasing power.

To overcome the compounding effect of inflation, your investments need to grow enough to offset the rate of inflation, currently 2% in the 12 months to May 2024 from a peak of 11.1% in October 2022.


Mistake 2: Timing the market

It is easy to get encouraged by the success stories of people who have timed the market perfectly and realised huge returns. Exciting as these stories may be, it is important to remember that they are generally just that - stories.

The reality is that many investors who try to join in on the game of market timing often get stung by unexpected market corrections and other phenomena that are difficult to predict.

Essentially, investing is usually about time in the market, not timing the market. If you are getting nervous about market volatility, it might be good to seek professional advice.


Mistake 3: Misunderstanding risk-reward

Low-risk, low-return investments certainly have their place in any portfolio, however, if you want to keep ahead of inflation and grow your purchasing power, it is also important to have a diversified portfolio with some higher-risk, higher-return investments as well. Especially for those who are still a long way from retirement.

Overcautious investing can mean that you will lose out on growth potential within your portfolio. But this does not mean you need to bet the house on a volatile company or speculate on an entirely new market. What it does mean is that it can be wise to balance your portfolio with asset classes that typically have higher growth potential.


Mistake 4: Making poor withdrawals

Deciding when to stop saving and start spending can be difficult to judge. It is important to remember that each person’s needs are different and while, for some, it may make sense to dip into their capital, for others it makes no sense at all.

The best way to have confidence is to have a plan. Speak with a retirement wealth planner to work through what is right for you.


Mistake 5: Ignoring the difference between good value vs. fees

It is worth noting that good value and low fees are not the same. While fees essentially only concern price, value considers the quality of the service and investment management that you get in return for what you pay.

Another point to consider when assessing value versus fees is exit penalties. Companies with exit penalties charge customers if they move assets to another manager or access their investments to fund their retirement. This is something to consider when deciding if a financial service is of good value.


Mistake 6: Ignoring foreign markets

Many retirees feel a sense of loyalty to their home country. However, this sense of loyalty need not be reflected in their portfolios.

Having a portfolio that is exclusive to home country investments significantly reduces the number of opportunities you will have to increase your nest egg. For a private investor, trying to understanding new markets and research foreign companies could be daunting, however, a professional portfolio management team has the expertise and resources to access markets with higher growth potential on your behalf.

Explore opportunities beyond your backyard and broaden your investment horizon for potential portfolio growth.


Mistake 7: Not seeking advice

As you navigate investing, remember that you do not have to do it alone. Like most things in life, it is often best to have a second opinion – especially when it comes to retirement investing. Seek advice from an investment professional or firm with the experience and expertise to guide you on your investing journey.

The list above might make investing seem like a minefield, but that is far from the case. With the right plan, guidance and advice, you can avoid these mistakes and get on the track to enjoy your retirement dreams.

Seek guidance from Arbuthnot Latham's expert wealth planners for tailored retirement planning that secures your financial future.


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Further reading about Retirement Planning



The 'Are you ready for retirement?' Quiz

Take our quick six-question quiz to find out if you are ready for retirement and how to plan making your dream future achievable.


Life beyond work: How to plan for retirement

Starting your retirement planning as early as possible gives you the freedom to choose what life looks like in the next phase of your life.


Take control of your retirement

Whether retirement will see you bungee jumping in South Africa, or trampoline jumping with the grandkids, taking time to plan now, gives your dreams the chance of becoming reality.

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