How to avoid these 10 biggest retirement pitfalls

One of the most common mistakes is not educating yourself about saving for retirement from a young age. Picture: Independent Newspapers.

One of the most common mistakes is not educating yourself about saving for retirement from a young age. Picture: Independent Newspapers.

Published Nov 23, 2023


By: 10X Investments

Many of us invest, with the hope of receiving our money back in years to come and enjoying a secure retirement. But not all of us get the opportunity to realise the full value of our investments. Here are ten most common mistakes people make when it comes to saving for retirement.

1. Not educating yourself

One of the most common mistakes is not educating yourself about saving for retirement from a young age. Essentially, the earlier you start saving for retirement, the better due to the compound interest rate. Even a five to 10-year delay can have devastating consequences in halving your future investment.

2. Retiring too early

We are seeing people living longer than ever before; which means that retirement investments need to be meticulously planned, so that you don’t end up outliving your savings. Factoring aspects such as inflationary costs, and realistic expenses at retirement age all have an impact on when you can afford to retire.

3. High investment fees

High fees have the consequence of eroding investment growth. 10X is offering new investors six months of zero fees as an incentive to kick-start your retirement investment. The Free Fee Campaign is a great way to start your retirement investment journey.

4. Incorrect asset allocation

Many people make the mistake of making too conservative investments and too early. Investors might be nervous about markets and volatility, yet it’s crucial to ensure that what you get out is much higher than what you put in.

5. Avoiding family planning

It's important to plan with your partner and involve them early on around retirement investment planning, savings expectations, as well as future implications on the estate. When retirement and investments are discussed, sitting down and planning retirement outcomes with your partner and loved ones is important.

6. Active vs passive fund management

Passive funds will outperform active funds over a long period at a lower cost. Active funds try to outperform the market with higher costs and are useful for short-term investments. To beat the market over a 20-to-30-year period is very difficult. Passive funds also help with diversification and for ensuring you get market-related returns.

7. Not speaking to an independent financial advisor

Speaking to an independent financial advisor is always a good decision to be able to help you with your and your family’s financial planning. It’s important to always look for financial expertise and to do your research when it comes to planning your retirement. Financial planning doesn’t require breaking the bank to do so. Fat Wallet is an online podcast and social media community that produces webinars and blogs around financial planning, which can help you understand where the markets are.

8. Not saving enough for the future

As consumers we often tend to live beyond our means, and in our current economic climate, many people in South Africa are increasingly becoming dependent on credit for basic living costs. Taking on more debt now will only negatively impact your retirement savings for the future.

9. Taking out your retirement savings too early

Try to avoid taking out of your preservation fund, as there are tax implications if you resign or leave. This money could be rather saved to grow in a retirement fund to avoid high tax penalties.

10. Not taking advantage of employer retirement funds

Often, a company will offer a provident or pension fund, and employees don’t take advantage of it. Try to contribute as much as you can on top of what the company contributes. Employers need to communicate and educate employees about their savings and investing a portion of their salaries for retirement.

* 10X is a pension fund administrator.