3 reasons why you may NEVER be able to retire
Are you one of those people who are dreaming of retiring in the sun? A silly question, perhaps. Who isn't?
Well, chances are you may be sleepwalking into a situation where you will spend your retirement years scraping together the coppers instead. That is if you get to retire at all.
Don't jeopardise your chances of living the high life in retirement by...
Not investing enough
As I commented in a recent article, the majority of Britons are in danger of not putting enough money away for when they are old.
Some choose to simply live in the here and now and are content to spend almost all of their salary on life's luxuries and kick the can down the road. Others may be confused or misinformed about how much they need to put in their pension pot. There are plenty that merely don't earn enough to set enough money aside for retirement.
Whichever bracket you think you may fall into, it pays to find out how much income you will have by the time you come to retire. The government-run Money Advice Service is a good place to start -- they have a pension calculator on their website that can give you an idea of what steps you need to take to quit work and live in comfort.
Investing in low-performing accounts
Making mistakes is part and parcel of investing, but arguably the biggest faux pas you can make is by sticking your excess capital in a low-yielding savings account.
According to Moneysupermarket.com Paragon Bank offers the highest interest rate for an instant access cash ISA today, one of those instruments whereby you can invest up to £20,000 in a tax year without being hit by the taxman. However, this figure falls well short of current inflation in the UK (the official CPI gauge chimed in at 2.4% in June), meaning that your money is essentially losing its value.
A better way to take advantage of the ISA system is by opening a stocks & shares ISA. While riskier than a cash ISA, if invested in the 'right' stocks, ETFs or investment funds you could really turbocharge your returns.
Buying the wrong stocks at the wrong time
Ah, you may say, finding those so-called right investment destinations is easier said than done. Billionaire investor Warren Buffett had his fingers burned when his Berkshire Hathaway vehicle loaded up on Tesco in 2012, a decision that eventually cost the investment firm an eye-watering $444m. Clearly not even the best are immune from making poor decisions now and again.
I regretted investing in Melrose's recently-acquired GKN several years back. By the time I sold out its share price had been hammered due to slumping sales at its Land Systems unit. SSE would also have proved a costly error had I not sold up once the growing influence of smaller, cheaper operators became apparent. Fortunately by the time I shifted out I found myself sitting on a tidy profit.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of Melrose. The Motley Fool UK has recommended Berkshire Hathaway (B shares), Moneysupermarket.com, and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.