Watch out for these five stumbling blocks to retiring well

Retirement can feel like an event that's always far out on the horizon. That's what makes it so easy to lose track of your savings strategy. But how do you know what to look out for and how can you avoid straying from your plan? This list will help you answer those questions.

1. Don't give in to instant gratification

Whether it's spending money you ought to be saving, or cashing out on your pension fund to clear a little debt, instant gratification is something to avoid. It's no coincidence that self-control and a future-oriented perspective are key traits of success. Try to remember what you're working towards by taking time regularly to visualise the standard of living and priorities you might have once you stop working.

Financial independence is very valuable, both materially and psychologically. Saving enough so you can choose where and how you retire can lessen the financial burden on your family in the future, so that, for example, when your children are grown, they can focus their finances on themselves and their own kids. If you stay disciplined, you'll thank yourself later!

2. Keep up with inflation

Inflation is the increasing cost of living that you need to keep up with - and hopefully beat. Over the past five years, the inflation rate has averaged close to 5%. That means your investments need more than a 5% return, just to break even.

Inflation can be the silent killer of your savings plan if you don't factor it into your investment strategy. It's a good idea to speak to your financial adviser about whether your investment strategy can beat inflation and give you real growth over the long-term. That way you can make a more informed choice about which investments to make.

3. Balance your assets appropriately

It's important that your mix of assets is appropriate for your age. When you're younger, you should have more invested in equity and property. Although risky over the short-term, equities and property grow far more over the long-term, even when accounting for large drops in value in between. As you get closer to retirement, you should lower your risk a bit, but still keep the right portion in riskier assets. By balancing your assets and having enough of different types of assets, you will avoid concentration risk.

4. Diversify your portfolio

What this means is don't put all your eggs in one basket: that is, don't put all of your money in one place as you could lose it all. Spreading your investments out will protect them from depreciating, so if one investment takes a knock, the others can make up for that loss. Make sure your investments are diversified across different asset classes and local and global investments, across many different securities.

Remember, Discovery offers everything from diversified single asset funds to fully managed multi-asset funds for every need.

5. Keep a cool head and don't invest emotionally

Never make emotional decisions when it comes to your money. Remember that dips in the market tend to happen every seven years or so, but they don't need to have life changing implications. History shows that over time, market crashes and recoveries average out. Investors who panic-sell often miss out on recoveries and turn a paper loss into a real loss! Since saving for retirement is a long term savings strategy, patience over panic will help ensure you don't miss out on compounding over time.

This also goes for over optimism when the markets are doing well. If you stay your course and remain disciplined, you'll have much better chances of reaping the rewards when it's time for you to retire! If you're tempted to switch funds when markets move up and down, speak to a financial adviser first to get an objective opinion.

Overcoming these hurdles will be a long term part of the process of preparing for retirement. But there are other things to consider too, like finding out how your net worth fits in with your retirement planning. Learn more here.

This article is not financial advice. Please consult with a financial adviser for financial advice.