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  • Rukevwe Erakpotobor

Seven Most Common Pension Mistakes to Avoid

For many pensioners, pensions are a straightforward concept where employers make monthly deposits into their retirement savings account and disbursements are made upon retirement. This perception more often than not results in pension errors that include, but are not limited to, trusting the wrong administrator, withdrawing savings too early, or not tracking savings at all. Whether due to ignorance or disregard, these errors can have immediate and long-lasting effects on your overall retirement.


In this article, we have curated a list of common pension mistakes to avoid as a pensioner. We address these issues because they are crucial for your retirement, and receiving clarity will help you invest smartly and retire with ease.


Most Common Pension Mistakes to Avoid


Trusting the Wrong Administrator

The first costly pension error many pensioners tend to make is trusting the wrong pension fund administrator (PFA). Choosing a PFA should be done with utmost care because your PFA can either make your retirement seamless or torturous. Bad PFAs don't often engrave warning signs on their logos or websites and this is why we have compiled a list of attributes to help you choose the best PFA.



Cashing Out When You Change Jobs 

It is normal to change jobs as you advance in your career. However, what this means for you as a contributory RSA holder is that you must update your employer details as often as you change jobs. Sometimes, it gets tempting to empty your savings account and start all over, or even create a new one with a new PFA.  


Your pension can only grow when there is a buildup of funds over time, and emptying it frequently does not allow for such opportunities. Leaving your money invested is the only guarantee that it will continue to grow. 





Not Tracking Your Pension Savings 

It's not enough to create a pension account and let it sit until you’re ready to retire. Many pensioners do not even know how much contribution they make monthly, relishing the satisfaction of owning a pension savings. It is important to regularly track and monitor your pension investments and study statements to ensure that your contributions are in line with your retirement goals. 


Periodic checks present you with the current realities of your savings, helping you decide whether you should boost your savings or even petition your employer for faulting in contributions. Ideally, your PFA should provide updates regarding pension balance, investment status, and other industry-related information. Be that as it may, it is important to be proactive about your pensions and not wait until you suspect something irregular. 



Underestimating Your Retirement Needs

It is common for many pensioners to underestimate just how much they will need to maintain their desired standard of living in retirement. It is important to take the time to calculate your expected retirement expenses, including housing, and leisure activities, to ensure that you are saving enough to cover your needs. Also, remember to factor in inflation, potential healthcare costs, and other factors that may fluctuate in value.




Forgetting About Fees

This is one of the most important common pension mistakes to avoid at all costs. Never assume or live in the delusion that you aren't charged a token for fees that pertain to maintenance, withdrawal, and taxes.  


While some of these fees may vary depending on your PFA, it is only ideal that you know exactly how much is charged. With this information, you can tell if you’re overcharged or when there are shady deductions.  



Withdrawing Your Savings Too Early 

When is the right time to withdraw your savings? Should you do this immediately after retirement or just before you retire? According to PENCOM, pensioners who contribute lump sum payments can start withdrawing from their pension pot at age 50, whether retired or not. While this might sound pleasing, bear in mind that withdrawing funds from your pension before retiring can result in diminished retirement savings. This is especially true if your retirement age is still way ahead. 


Unexpected financial hardships may sometimes arise preretirement, but tapping into your pension early should be a last resort. Instead, explore alternative options such as loans or assistance from acquaintances before dipping into your retirement savings.




Not Revisiting Your Retirement Plan

Perhaps you had your retirement years figured out earlier in life; however, life isn’t static, and major events are bound to instigate changes. Factors such as health issues, relocation, or career changes tend to significantly influence or even disrupt existing plans. It is therefore crucial to regularly review your pension plan and adjust it as deemed fit to match your current realities. 



Conclusion 

Planning for retirement is a marathon that requires your conscious and active involvement. The curated list in this article is only a few of the many common pension mistakes to avoid to guarantee smart investment as you prepare for retirement. For more guidance and pension insights, contact the Oakpensions team of seasoned financial experts at info@oakpensions.com.

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