10 Retirement Planning Mistakes


I found a great article about 10 mistakes people do when planning for their retirement. I really like to compare how they do it in the United States and find the knowledge that could assist us.

  • Not taking full advantage of your company retirement benefits

You should invest as much money into your company retirement plan as you can afford. At the very minimum, you should invest enough to get your company matching funds if they are offered.

This is only applied to private employees. Here we have EPF fund ( it’s called 401K in the US). Try to contribute as much as possible to take advantage of matching dollar contribution from your employer.

  • Withdrawing money from your retirement plan

By withdrawing money from your retirement plan, you lose valuable interest that is extremely difficult to replace. Some plans allow for hardship withdrawals and/or loans but you must be careful when taking advantage of these withdrawals. In addition to losing interest, you could face penalties or early withdrawal fees.

We like to use EPF money as much as we could. If you ever need to do this, do that for your future sake . Remember that the money is for your future self, so respect it.

  • Not actively monitoring your investments

Monitoring your investments makes sense so that you are aware of any discrepancies. Monitoring also alerts you to how well your investments are performing or not performing. If you are carefully tracking your investments, you will be better equipped to know when to switch to a different strategy.

  • Relying on pension for your retirement income

While pension might provide a substantial portion of your retirement income, you should have other means of income as a back up. It’s best to have a portfolio of investment and personal savings in addition to pension when you retire. You don’t want to stuck with the half paycheck for your whole life, do you?

  • Relying on your kids

Living in Malaysian community which value family more than I have seen in another part of the world, many of us depends mostly on our kids to take care of us in our old age. This becomes some sort of investment to us. While the term ’investment’ is highly inappropriate but the concept is still there. While it’s a bonus to receive money for them, we should at least have our own plan to take care of ourselves. Kids these days have lots to worry for themselves.

  • Forgetting to review your plan regularly

If you forget or ignore reviewing your retirement plan on a regular basis, you might be losing a portion of your retirement income. You need to periodically review your asset allocation, your balances, your goals, and so on to insure you are making the most of your plan.

  • Practicing poor asset allocation

Poor asset allocation can be financial suicide. What if all your investments are in one stock and the company goes bankrupt? The secret is to diversify so that if one investment decreases in value, another will hopefully increase.

  • Putting All Your Money in Savings

When we come to an old age, our risk tolerant become less and less. Well, that doesn’t mean that we have to put our money in savings account or at best in fixed deposit. While we can’t tolerate high risk as we did in our twenties, putting the money where it is rotted by inflation is not the answer. Find some more conservative investments that give more returns but still in acceptable gamut of risk (e.g ASB)

  • Relying too heavily on your company stock

Your company stock is a very good way to save for your retirement especially in your company retirement plan. This can be dangerous though if your portfolio consists of mostly company stock. All companies have lean times and some could have mismanaged finances that could result in bankruptcy. It’s best to have a good investment mix in your retirement account.

I never heard of employees being given company stock for retirement plan in Malaysia. However, I just want to point out that this is the biggest mistake. If ever that your company in trouble, or they have to fire some other employees to cut cost, this will effect its stock value, just in time that you need money the most, if you are one of them.

  • Not taking retirement planning seriously

This very well could be the worse mistake a person can make about his/her retirement plan. Even if you are a very young person, your retirement plan should be a serious priority. By starting early, you can grow quite a large nest egg and might just be able to retire early. A lot of people feel they have plenty of time to worry about retirement planning once they have their home, children through college, the new Hummer, and so on. My answer to these people is to think about the life style they might want to keep once the paycheck stops.

Bottom line is to take your retirement planning efforts seriously, diversify your investments, save regularly, and keep your goals in mind.

[heavily modified from Retireplan.com]

This is one of the posts for Retirement Week. You can find more post here.

  1. #1 by Nizami on February 21, 2009 - 1:20 am

    such an eye opener..good post

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    I’d be inclined to concur with you one this subject. Which is not something I usually do! I enjoy reading a post that will make people think. Also, thanks for allowing me to speak my mind!

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    However, like my pastor repeats often, Never too late to learn.

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