Five Big Money Mistakes Savers Make Before Retirement


Most people look forward to their retirement as a time for some peace and relaxation away from the torment of daily toil they have endured since starting work.

But these golden years can be financially stressful if they have not managed to save enough to cover their living expenses.

How much you need to save is a flexible figure that depends on how long you think you will live and if your health lasts, meaning you spend less time and money on health care.

For some who live into their 90s or even longer, they need to have enough money to pay for living costs for every year they work, plus another chunk of cash to pay for 35 years or more in retirement when they will not have an income.

But you can maximise your savings if you avoid these five major pitfalls before you retire:

Don’t invest in a timeshare or holiday home

Lots of retired couples invest in a static caravan in the UK or golf course resort somewhere sunny, but forget to analyse the cost against usage.

Generally, it’s much cheaper to keep the cash invested and drawdown for some nice holidays  – and you don’t have to keep going back to the same place.

On top of the upfront purchase price, there are annual maintenance fees, service charges and expensive fees if you want to sell.

Don’t pay off cheap loans too quickly

Low interest rates mean investing cash rather than paying off cheap loans can work out more profitable than ditching the loans straight away.

Debt is not all bad if the rates are cheap.

Don’t overstretch finances funding the family

This can be a tough call. Everyone wants to help their children by funding education or buying a home, but you need to take a holistic view.

Student loans are cheap borrowing, so let children take the borrowing rather than replacing the cash with money that could be earning an investment return.

You may be helping them, but damaging your own finances in retirement.

Keep some emergency cash

Instead of expensive credit cards or overdrafts, run your own emergency savings account which you can draw against and refill by paying yourself back.

Build the fund over time to cover at least three month’s bills, although six months is better.

Then, if you are long term sick, pick up an unexpected big ticket bill or lose your job, you have a safety net

Don’t borrow without considering the risks

Borrowing to offset big expenses , like a car, need careful consideration. Be careful not to spend more than you need or can afford. Many buyers forget to think about the running costs when these purchases.

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