MENU 3 costly retirement mistakes I’d avoid Tezcan Gecgil, PhD | Thursday, 18th July, 2019 The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article. Image source: Getty Images. As people near retirement, their biggest worry centres on money, or rather lack of it. Surveys indicate that many people over the age of 55 have low levels of financial wealth and very little in assets other than their homes. Therefore, today I’d like to discuss how to possibly avoid three potential retirement errors that affect many adults. 5 Stocks For Trying To Build Wealth After 50 Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains. But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval… We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio. Click here to claim your free copy now! 1. Not knowing how much retirement will cost The first mistake most people make is to have unrealistic views of how much retirement may cost. There are various educational programmes available through employers, the government, and the websites of regulated financial advisors that aim to introduce the public to different retirement planning products. One suggestion is that you’ll need between half and two-thirds of the salary you earned before retirement to maintain your lifestyle. A safe range would be between £24,000 and £28,000 a year. This amount assumes that you do not have any mortgage or rental payments to make in retirement. 2. Not knowing how you will pay for retirement Let us assume that starting at age 65, you’ll need £28,000 per year and you expect to live for another 25 years after retirement. Let us also leave your potential State Pension or any other private pension income aside for now. One way to calculate how much in savings you’d need is to multiply £28,000 by 25. The result is £700,000. This calculation further assumes that the total amount, i.e. £700,000, will earn no interest income over those 25 years. In other words, if you’d like to finance your retirement fully with your savings, simply multiply the amount you’d need per year by 25. You may also be entitled to the State Pension. At present, the full basic State Pension is £168.60 per week, but you’ll only get a proportion of it if you have between 10 and 35 qualifying years. You may have other streams of income, such as from rental property or a private pension. The important takeaway is to be realistic about how much money you will need in retirement. 3: Not knowing how to save £0.7m by age 65 The last error most people make is not appreciating how important it is to start saving early on when you can take maximum advantage of compound interest. My Motley Fool colleagues have written at length about funds and stocks to consider for a diversified retirement portfolio and have pointed out that the stock market returns about 7% to 9% annually on average, much more than the best regular savings account. You can also find financial calculators online to see how much your savings would grow over time. Let us assume that you’re now aged 40 with only £100 in savings and that you plan to retire at 65. You decide to invest that £100 in a fund now and make an additional £9,000 of contributions annually at the start of the given year. You have 25 years to invest. The annual return is 8%, compounded once a year. At the end of 25 years, the total amount saved becomes £711,274. Saving £9,000 a year would need you to put aside almost £750 a month or about £25 a day. Although the amount may look daunting at first, you’d be surprised at how much you could save if you paid attention to your monthly outgoings. Knowledge is power The facts are clear: most people are not well prepared financially for their golden years. However we can use investment knowledge to change this. One Killer Stock For The Cybersecurity Surge Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028 — more than double what it is today! And with that kind of growth, this North American company stands to be the biggest winner. 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