'Common pitfall' – The 'first mistake people often make' when planning for your retirement

‘People put their heads in the sand’ with retirement says expert

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On the podcast, Rewirement, from Legal and General, presented by Shirley Ballas, the subject of how to approach this massive subject arose and guests gave some useful tips to anyone thinking about retirement.

Ms Ballas asked Emma Byron about the common pitfalls people have when they plan their retirements and how they can be resolved.

Ms Byron said: “The first mistake people often make is that they’ve put their head in the sand, they’re scared to think about retirement, they don’t understand the terminology.

“People do have to bite the bullet and spend a day really thinking about retirement and trying to understand it.”

But when approaching this big subject, there’s lots of help available to help people make the right decision for them, she said.

“There’s lots of tools and information out there from the Government in terms of Pension Wise and also on providers websites and so on,” Ms Byron continued.

Pitfalls

There are common pitfalls people fall into when planning their pension (Image: Getty)

Pension Wise is a free Government service offering impartial guidance for people about their pension options and it has become the first port of call for people looking to find their feet when it comes to pensions.

Even when people are up to scratch on the details and jargon of the pension system today, there are still many pitfalls, Ms Byron said.

“People do underestimate how long they’ll live for. Often people will use an indication of how long their parents have lived for and expect that that’s how long they themselves will live for,” she said.

“But, as we know, people are living longer and longer thanks to medical science and healthier lifestyles.”

She said: “It’s much more related to education, socio-economic factors, lifestyle factors: Do you drink lots? Do you smoke?”

People should know, when it comes to this, that there are life expectancy calculators out there which simply “allow people to plug in some information and see how long they are expected to live for”, Ms Byron said.

“But, by definition, that’s an average.

“Some people will live for a lot longer than that and some people for less time so, around that point, I think it would be back to planning for different scenarios and thinking through if you were to live significantly longer than you expected, how would you manage that?”

She said there’s mixed evidence on overspending in the first few years of retirement, but it’s certainly a concern. “We see and we expect the jubilation, excitement of being retired; off you go on many cruises and a fulfilling of travel desires that you might not have been able to do when you’re retiring or you know giving children money etcetera and now you have access to this additional fund.

“So I think that there is definitely a risk that people fall into that trap,” she said.

But, saying that, those who have thought ahead and still have enough to last for years ahead – despite that perhaps excessive spending in the first few years – spending is not something they should necessarily avoid, the expert added.

Infographic

What is the state pension? (Image: Express)

“It’s just about thinking through and planning for the different options and having some flexibility in your spending.”

Finally, Ms Byron said talking about financial matters and money is “the last remaining taboo in the world”.

She said people need to be discussing their finances with those closest to them to be able to make sensible decisions.

William Murphy

William Murphy

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