Mary Waring author of The Wealthy Woman (£12.99) lists five retirement mistakes that are doomed to fail!:
MISTAKE 1. Relying on the state
I've met many women who tell me they’re going to rely on the state when they retire. However, this soon changes when they hear that the state pension is £5,881.20 per year - a measly £490 per month. After paying utilities and food, there's not going to be much left. It's enough to keep you off the breadline, which is all it was ever intended to do. But who wants to live just above the breadline after a lifetime of hard work?
MISTAKE 2. Relying on your husband or partner
This is a common plan, but you need to check that the pension pot does in fact have enough money in it for both of you. In many cases there is not enough to keep one person in comfort, let alone two.
MISTAKE 3. Relying on an inheritance
Not a great idea when you consider you have no idea at what age you will receive your inheritance. Your parents could live to their mid 90s and beyond and you could be well past your planned retirement age at this stage. Also, inheritance tax kicks in at 40% on the value of any estate over £325,000, and this will reduce your inheritance significantly. Another issue to consider is that, in the future, your parents may need lon- term care. And the value of their estate may be used to pay for it.
MISTAKE 4. Rely on your children
Whilst many children would be very willing to help their parents, you do have to consider the state of their finances. Depending on their age, they may be saddled with an enormous mortgage and may, themselves, be struggling. There won't necessarily be any spare cash to help you.
MISTAKE 5. Hope and pray
Hope is not a strategy! If you have this as your plan and realise when you get to retirement age that the plan hasn't worked, it's then too late to do anything about it. It's much better to have a separate plan and then, if the universe somehow gives you all you need when you retire, you’re going to be feeling very comfortable indeed.
Do it yourself!
Mary says: "Of course, the most sensible option is to take responsibility yourself and take the necessary action to save sufficient funds. Bear in mind you'll be looking for your money to last 20 to 30 years if you retire in your mid-60s, so start planning as early as possible so you can enjoy your retirement years doing all the things you love to do."
Mary's retirement action plan:
- Consider a cash ISA. If you've never saved before this will help you set up a savings habit. However the interest rate is small, so this option is purely to help you get into the habit of saving rather than to be used a long-term plan.
- Once you are comfortable with how much you can save each month start looking at a stocks and shares ISA, which has the potential for greater growth than a cash account.
- When you have used your annual ISA allowance (currently £15,000 each year) consider investing in a pension plan. There are significant tax benefits to investing in a pension plan. The limits as to how and when you can draw the funds are to ensure that money is actually available for your retirement rather than for use as general savings.
There’s more money-saving advice in every issue of Yours magazine, out every fortnight on a Tuesday.