We make assumptions every day; we have to otherwise we would never get anything done. Most of the time the assumptions we make are either correct or immaterial if they prove to be incorrect. “When I drive my car today I’m not going to crash.” or “It’s not going to rain today so I won’t need an umbrella”.
When it comes to planning our money, making incorrect retirement assumptions, however, could prove to be very costly.
Are you making any of the following 14 retirement assumptions that you may later regret?
- The markets are about to fall so I will sell my investments. It’s OK though because I’ll get back in at the right time (they might not and you probably won’t).
- I won’t bother planning for my retirement because I’ll want to work until I die (your attitude might change or you may not be physically or mentally able to work).
- If I stop working I don’t know what else I will do (by taking time to plan you may discover interests that provide more fulfilment than your working life does).
- I’ll be able to save more later (that opportunity might not arise and in the meantime you are missing out on the power of compound interest).
- I might get hit by a bus tomorrow so I should live for today (you probably won’t).
- I can make more money managing my own money (maybe but probably not. The cost of advice is likely to be less than the mistakes you may make doing it yourself).
- There is no point contributing to pensions, they’ll only shift the goalposts (you need to take control of your own financial future rather than relying on the government. Rules may change but the government can’t afford to have an ageing population relying on the State so they can’t make pensions too unattractive).
- I’m going to inherit my parent’s wealth so I don’t need to worry (it might all go on the cost of later life care or they might leave it to others. Don’t count your chickens before they hatch!).
- I’ll start planning for retirement later (the longer you put it off the costlier it may be because you won’t have built up sufficient wealth or missed other opportunities).
- The shares I own have always provided a good dividend and the company is sound. (Big companies fail. Think Carillion, Lehman Brothers and Enron)
- Property prices always go up and we’ve never failed to have a tenant (Property isn’t the investment panacea many like to think it is).
- I’ll sell my business when I want to retire, that’ll provide the money I need for retirement. (you might not get the value you expect or be able to sell when you want or need to).
- We don’t have an extravagant lifestyle so don’t need much retirement income (don’t ignore the long-term effect of inflation on even modest lifestyles).
- My parents didn’t live for long after they retired so I probably won’t either (with the pace of medical advancements we are living longer and longer so you may need your money to last much longer than you anticipate).
If you think you could benefit from professional advice to avoid the traps of these fourteen assumptions contact me by clicking here.