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5 Common Retirement Planning Mistakes & Ways To Avoid Them

By Kian Ng

Planning for retirement isn’t flawless. Learn about some common mistakes and how to avoid them.

Retirement planning is among one of life’s priorities as we would want to have enough to fund a retirement in the lifestyle and up to the life expectancy that we want to live out.

As you prepare for retirement, chances are you may have tripped over one of these mistakes that may cost you in the long-run, for example you may have to work for extra years before you can afford to retire. Luckily, there are ways to recover from them if you are willing to make changes.

Here are some retirement planning mistakes people commonly encounter and some tips to ensure your planning gets back on track.

Mistake #1. Not having retirement plans

Of all the financial mistakes, the most common mistake is when people don’t even have a plan.

In this day and age, you must have some plans to ensure that your retirement planning is on track.

Based on the Employees Provident Fund (EPF)’s annual report, majority of Malaysians have not saved enough to last them more than five years post-retirement. At the same time, according to the Department of Statistics Malaysia (DOSM), an ordinary Malaysian is expected to live for 74.5 years. If you retire at age 55, and your funds dry up by age 60, what will you do to provide for yourself for the following 15 years?

Even if you do have some money tucked away in a retirement fund BUT it is lower than what you have calculated you need, you are still in a vulnerable position. In your desperation, you are likely to become an easy target for scammers. You could end up losing it all.

Solution #1. Start making retirement plans

Retirement planning is important to ensure targeted funds are available upon retirement.

Even though a plan may only cover projected values for your retirement, at least these figures have taken into consideration inflation rates, interest rates etc. Knowing the numbers can give you an idea of what minimum amount you need to sufficiently supporting your chosen lifestyle.

A good retirement plan will also clearly tag different assets towards specific purpose i.e. children education, retirement, or discretionary expenses. The asset tagging for different purposes will allow retirees to cross-check whether their allocation is unbalanced and thus justify whether an adjustment is needed. For example, if investments in unit trust fund are tagged to your child’s education planning, it should not be calculated for retirement planning to avoid double calculation that could give an impression that all plans are still on track when they are not.

Mistake #2. Not investing; only saving

Many still believe the old rationale that their retirement can be funded by their savings. And so they save and save. To them, investing is risky and practically counted as gambling!

The truth is that money needs to grow to catch up with inflation rates. Low interest rates of bank savings accounts are not able to sufficiently grow your money on par with inflation rates.

This is made worse when individuals close their eyes and lump together all emergency savings, business funding, personal expenses funding into one pool fueled by savings while hoping that this is enough to cover all their monetary needs now and always.

Solution #2. Opt to invest your savings

Investing your money helps your money keep up with inflation rates. Avoid keeping all your eggs in one basket by choosing to invest diversely.

How do we invest with better certainty even though there is so much uncertainty in the market?

Managed Portfolio, income portfolio or private mandate accounts can be good options to diversify risk. However ,the composition should be based on your risk tolerance to ensure you have peace of mind while investing. Since we invest to ensure our net worth grows by years, changing asset classes combinations with time is necessary as the market responds differently to current events.

While investing is such a simple term, the options for investors are diverse. To begin, investors should have familiarity with the following questions.

  • Are you familiar with the various assets classes available in the market?

  • Do you know what suits your personal risk profiling?

  • Have you assessed your own risk tolerance?

Now, answering these questions aren’t always as easy as you would need some financial knowledge, time, and also capability to do an analysis on your own. If you need help understanding the questions, seek the aid of either knowledgeable friends (and second opinions!), or consider directly talking to a professional by engaging a licensed financial planner.

Mistake #3. Greed

Many people believe that they can earn easy money by investing in get-rich-quick schemes, with the hope that their wealth can be doubled in the shortest periods of time. Greed blinds their minds from even questioning the validity of such schemes.

A study carried out by the Telenor Group covering scam victims in Malaysia, India, Singapore, and Thailand concluded that Malaysians are the most vulnerable to Internet scams. Which means, the chances for a Malaysian to lose their money is high and this could be costly for those who have invested their entire retirement funding.

Solution #3. Seek a second (professional) opinion

Scammers have many ploys to trick investors into believing them. Even when it seems like the whole world is rushing to jump onto a super amazing opportunity with lucrative returns, it is best if one can stay rational. Face your fear of missing out and calm down.

When returns are lucrative, rather than jump into the pan while the fire is hot, take it more as alarm bells ringing instead. Seek a second opinion from others who are not involved in the scheme but have some good knowledge about matters related to the topic, preferably someone with professional certifications such as a licensed financial planner.

Do your homework too. Make sure that you have sufficient time to evaluate the cost-benefits analysis and learn the pros/cons of the scheme. Learn to resist peer financial pressure while you do your homework. This is to avoid rushing headlong into making the wrong investment decision which could have severe repercussions on your retirement fund.

Mistake #4. Investing in only 1 asset class

There are some investors who may also lean towards just 1 asset class to plan for their retirement planning. This would be a mistake.

For example, many people follow some unlicensed investment guru’s advise blindly thinking that investing in property is THE WAY to a secure retirement as property value may appreciate with time. These investors believe that they can live on the rent collected every month and live comfortably with that money.

The problem with this is that they fail to access their own risk tolerance. They may also overlook the risk of non-tenanted periods which may even last for years, especially during a financial crisis.

This can be applied to investors who rely heavily on other single asset classes such as stocks or foreign exchange schemes. In these situations, an even bigger risk needs to be factored in if they are not familiar the homework required to understand how they all work.

Solution #4. Building diversified and flexible portfolios

Retirement planning should not lean towards certain assets classes alone, which means one should not hold too much of one asset class and forget about the rest.

An example is holding onto too many properties for rental income. This may cause too little cash or liquid assets in hand as properties are fixed assets. If you were to need cash in hand, it takes time for the liquidation process to take place. Selling a property could take up to years for the right buyers and right pricing to be met.

A diversified portfolio has a good ratio to make up the composition of liquid assets, investment assets, and fixed assets. A good ratio should take up 1/3 of each assets class.

A flexible portfolio allows easy cash flow and liquidation to be made in the event of emergency. A good holding of income portfolio, fixed deposit, Tabung Haji, or ASB can be a good combination of liquid assets, which potentially could give better returns than savings accounts.

Mistake #5. Life changes occur, but retirement plans don’t change

As we live our lives, we encounter experiences and life events which change our plans. Because of this, very little of what we planned decades ago would hold true today.

For example, an unexpected occurrence forced a career change on you. Suddenly, although you are no longer young, you need to dip into your retirement fund to start your own business. This would leave you with a depleted income when you reach retirement age. What is more worrying is if the business encounters financial trouble leading to more money to be pumped from your retirement fund into the business.

Would your retirement plan made some time back still hold? Unlikely.

Solution #5. Regular reviewing of retirement plans

As life faces ups and down and is constantly changing, our retirement planning needs to be reviewed as well to adapt to the changes in our situations and our expectations.

Regular reviews are necessary to verify that our retirement plans are on track. This review serves as a checkpoint to safeguard the minimum required in our retirement fund that must be left intact. This review also assesses if changes to our plans need to be made to match our ability to accumulate retirement funds with the retirement lifestyle we want to lead.


Most people could have many things to be accomplished during retirement, but only have limited resources. We would like to travel all around the world during retirement but found out we can’t even meet the retirement needs up to our life expectancy. This is common amongst all retirees and potential retirees when the failed to plan for their retirement. Thus, one should be prepare not only to plan for their retirement, they should also aware of what financial mistakes they potentially committed to ensure their retirement is on track.

What other steps can be taken to avoid retirement mistakes?

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