Opinion – Grain in Grain: Discover the six biggest mistakes that can compromise your retirement

Achieving a peaceful retirement is simpler than most people think. However, simple does not mean easy. Setting a goal and committing to the discipline to achieve it is extremely challenging. I have been helping investors in this challenge for more than two decades and I can say what the biggest mistakes are.

The first error is related to Henry Kissinger’s famous sentence:

“If you don’t know where you’re going, all roads will lead you nowhere”

Not having a retirement plan

Having a plan for your pension is the first step to seeking a peaceful retirement.

Make no mistake, having a pension plan is different from having a pension plan.

You do not need a pension plan, but you must have a pension plan

It is not enough to contribute periodically to a pension plan. Having a pension plan is to trace the path that will take you from where you are today to where you should reach.

Not having a pension plan is like sailing the sea without instruments. You will feel lost at some point.

Defer the start of the retirement plan

One of the biggest justifications investors use is: I should have started sooner; now there’s no more time.

The best and easiest way to build your retirement plan is to start early.

This means that as soon as you start having income, you should start saving.

At the beginning of the career, when the salary is low, it is understandable that much of the income will be consumed. But, you must make an effort to create the habit early.

For example, you can start by saving 5% of your income each month. Alternatively, you can simply save the vacation bonus and 13th salary that are extras to the monthly budget.

Do not be deceived. In the future, when your salary is higher, it will not be easier. When your income goes up, if you haven’t created the habit of saving, your expenses will likely increase proportionately. Thus, there will be no surplus and the closer to retirement, the greater the commitment of your income to this objective.

So start now.

Invest only when you can

Every time I write about the need for individuals to create the habit of saving, I always receive criticism that Brazilians do not earn enough.

The ability to save is not the same as the ability to save. That is, earning more does not mean having more savings ability. Undoubtedly, your ability to save goes up when you earn more, but if you haven’t created a habit early on, you will always use the excuse you don’t have left to save.

If not, your expenses are higher than they should be. You can always cut.

Investing has to be a habit like brushing your teeth. It doesn’t matter if you want it, you need it.

Making withdrawals before retirement

The retirement reserve is not your liquidity reserve, nor the reserve for intermediate desires.

A plan must be created for each objective. For example, if you want to buy a car, create a plan for this purpose.

Many investors fall into the temptation of using the retirement reserve as a down payment on vacation homes or other purposes and use the excuse that it would be a form of investment or that it is better to use this reserve than to go into debt.

Undoubtedly, it is better to use investments than to incur debt, but this cannot be used as an excuse. First, the need for acquisition and the expected return on investment must be evaluated.

Prioritize a child’s college savings or even a child’s savings

Many believe that creating savings for their child or their college is essential.

Without a doubt, this can be an intermediate goal in your budget. Undoubtedly your retirement is a more challenging goal. But it cannot deviate from its main objective to fulfill easier objectives.

Remember, you can’t take on debt to fund your retirement, but you can fund your child’s college if the need arises. Therefore, it is important to keep the focus on the main plan.

Taking more than adequate risks

Many investors take more than adequate risks as a way of seeking to anticipate the achievement of goals.

Taking more than adequate risk can have two consequences. First, it can generate losses that result in a greater need for intermediary contributions and, therefore, a greater sacrifice of savings.

Another consequence would be that you cannot withstand volatility and end up having to take losses in unfavorable market moments. Again, these losses can compromise your ability to reach the goal.

As time goes on, if you avoid these mistakes and maintain the discipline to stick to the plan, the journey to your retirement will be an increasingly simple challenge.

Michael Viriato is an investment advisor and founding partner of Investor’s House

(Follow and like De Grão em Grão on social networks. Instagram.) ​​

If you have questions or suggestions for topics that you would like to see commented on here, please feel free to send them by email.