We all know that we need to plan for our future but few of us want to contemplate getting older so it is easy to keep putting off the topic. The fact is that planning for retirement is one of the most important financial steps you’ll ever take. Despite good intentions, many people fall into common traps that can delay or even totally derail their retirement goals.
These mistakes may seem small now, but over time, they could cost you a huge amount of money; tens or even hundreds of thousands of pounds or dollars.
Here are 7 retirement planning mistakes you should avoid, with action points.
- Starting Too Late
The earlier you start, the more that time, and compound interest and growth works in your favour.
Waiting even 5 or 10 years can cost you hundreds of thousands of Pounds/Dollars in the long term.
Action: Starting early, by which I mean by age 30 to 35, will make a difference. Even starting small will make a difference. Make time your ally.
- Not Increasing Contributions Over Time
Too often I have seen people decide to put away just say, 5% of income or just £100 a month, and never touching it again. As your income grows, the amount you save should grow too.
Action: You should aim to increase your pension/retirement contributions, your savings, with every salary increase or promotion.
- Underestimating Healthcare Costs
Medical expenses tend to rise significantly as we age. Even if you remain healthy, healthcare and related issues can be one of the biggest expenses in retirement, consuming a large proportion of your income.
In many countries, and of course this will partly depend on where you end up, healthcare is a personal expense and not state funded. Medical insurance is very expensive for people in their 70s and above.
Don’t forget to factor in dental fees, prescriptions, and also potential long-term care cost which can be very expensive.
Action: Plan ahead. As well as maintaining good insurance, consider setting aside a portion of your retirement plans for healthcare needs.
- Relying Only on a State Pension
State pensions rarely provide enough for a comfortable retirement. In most cases, they were only ever intended as a back up to private provision so you should never rely on this alone.
For example, in the UK the full amount of the new UK State Pension for the 2025/26 tax year is £230.25 per week. That’s £11,973. If you are a couple, that’s a decent amount between you but it is unlikely to be enough on its own and will be below the lifestyle you will want.
PLUS, that assumes you have a full National Insurance payment record and if you have been living abroad for some time, that may not be the case. You have the option to make voluntary payments so ask me for my up-to-date fact sheet with all the facts, how it works and what to do, with links.
Action: Treat your State Pension as your retirement foundation, not as your whole plan
Action: Click on this link to send me an email: keren@holbornassets.com with the subject “UK NI” for the fact sheet.
- Taking your money out too early
The money in your pensions and other retirement and investment plans are there to provide you with an income for the rest of your life.
Start taking it too soon and you could run out of money. The earlier you start drawing on it the longer it needs to last. The reality is that you could easily spend 20–30+ years in retirement, especially with rising life expectancy.
As an example, if you start drawing on savings at age 55, instead of age 65, that means you need to make your money last for an extra 10 years but without having an income to add to it.
Don’t take the risk of outliving your savings. If you want to retire early, you need to seriously plan for that.
Action: Consider your personal long-term needs. Let’s look at what is known as “cashflow modelling” to see if you are on track and how long your money could last when we factor in longevity, inflation, and more
- Failing to Diversify Investments
If you leave all your money in cash or one type of asset, you will leave yourself exposed to inflation risk, poor sector returns and geopolitical risks.
Action: Ensure you are properly diversified in a mix of assets that suit your views on investment risk. This is where expert advice can make a difference. Review all existing pension plans to ensure that you are suitably invested.
7. Not Having a Withdrawal Strategy
You need to think about how you intend to spend your money in retirement. Without it, you could outlive your savings. Do you know what you can afford to spend each year? Are you aware that your needs may vary year by year?
Action: Take advice on what income your investment can generate over the long-term, with related tax advice based on your intended goals.
Bonus tip: Do it now.
Start your planning today, don’t leave it as the years just go faster.
Taking small steps now will avoid big regrets in the future. Give yourself time to have the future that you want. Money is about choices and options
There are multiple investment options available to GCC residents. Equities, property, flexible and tax efficient plans. I don’t arrange the dreaded 20-25 year plans and never have, but I can access a range of options that are not available to the public directly, as well as funds that are intended for institutional and professional investors at lower than retail costs.
We look at equities, saving schemes, pensions, property, tax issues and much more to structure a strategy that suits you.
If you are approaching retirement a proper review, with independent advice, can give you real guidance on your options. And that leads to peace of mind.
Your future matters. Don’t leave it to chance.
How do I find out more?
Get in touch! Click on this link to send me an email: keren@holbornassets.com
We can have a relaxed and friendly chat without any obligation, and all initial meetings are over Zoom for maximum convenience.
Benefit from over 30 years of experience with facts and no nonsense. Expat-specific advice.
To arrange a discussion about any aspect of your personal financial planning, please email me at keren@holbornassets.com
Expert, qualified, professional advice on a range of issues including general financial planning, life and critical illness cover, investments and UK pensions, wills and inheritance tax planning, UK tax, property, offshore banking, citizenship programmes, currency transfers and more.
I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, other media, and on the Facebook group British Expats Dubai.
Serious topics with relaxed and friendly conversations.