If you are nearing retirement age chances are you have worked hard to accumulate a pension nest egg. Managing this money must be executed with extreme care in order to preserve the lifestyle you have worked for. The wrong decision can lead to significant losses.

Here are some of the most common mistakes people nearing, or at, retirement make with their retirement savings, and how to avoid them:

1. Thinking short term.

   Because you can live 20 or 30 years beyond your retirement date, you'll need investments that keep growing.

   At any stage of retirement, invest at least a portion of your assets in growth-oriented investments such as blue-chip stock unit trusts. A rough guide is to subtract your age from 100 to compute the minimum percentage of growth-oriented investments you should own.

2. Taking more than the tax-free amount.

   You can take up to one-third of your pension in cash, but after the tax-free portion the receiver will take up to 40 percent in tax before you see the cheque.

   To avoid this tax, have the money sent directly to a Compulsory Pension or Living Annuity. You can draw as little as 2.5 percent per year from a Living Annuity and only pay tax on the income you receive in that year.

3. Not anticipating inflation.

   Inflation won't retire when you do, so you'll have to depend on the growth of your nest egg to keep up with increasing costs.

   A well balanced portfolio is your best weapon for fighting the effects of inflation on your lifestyle.

4. Putting all your eggs in one basket.

   To minimise risk, maintain a diversified investment mix of blue-chip stocks, bonds, property trusts and money market funds.

   Most modern investment products give you access to a range of portfolio choices that will allow you to transfer money from one portfolio to another with ease to maintain the diversity you need.

5. Tapping retirement income too soon.

   Some retirees go on a spending spree as soon as they retire, and they regret it later.

   Delay withdrawing money as long as you can. The longer you can build up your tax deferred retirement assets, the better. This is especially relevant going into the future as people are living much longer than previous generations and life expectancy is increasing every year.

Five more common mistakes on page two and three...