Ever wondered how it would feel if you were left without central heating in chilly winter? Or perhaps had to rummage for throwaway deals at the local supermarket? Likely not. Sadly, millions of Brits are staring at such a future because they didn’t think of retirement planning early on. State Pension is of little use to many senior citizens to keep their body and soul together. As life expectancy in the UK rises, factor in at least 30 years in retirement. To ensure that you have enough money in your pocket in your golden years, plan your finances effectively when you’re still in your 20s or 30s. You can follow our decade-by-decade guide to be successful at retirement planning.
What To Do In Your 20s
Being a twenty-something is quite tempting. You just want to spend all that you earn and live life to the fullest. Even though retirement planning may seem unnecessary and a long way off, small and regular savings can indeed add up to a heavy money pot.
- Clear your debts
- Make sure to open an Isa
- Save whatever is left after daily expenses
In your 20s, you have your first job and first salary. It’s reasonable to let other financial objectives take priority over retirement planning. But, you should first repay student debt, bank and credit card debt, living costs and squirrel whatever you can afford to save.
How to choose the best Isa
Have you heard the saying, “Something is better than nothing”? Indeed, this is the right age to start paying in small amounts into your pension fund for retirement planning. This gives the money time to grow more in value over the years as you add more contributions every year. Retirement planning is all about forming healthy saving habits. One of the good places to keep your savings is in a tax-free Isa. Isa bank accounts help build financial resources for the decades to come and also provide greater flexibility with anytime access to your money. At this stage, pension isn’t always a necessity but it’s better to take advantage of generous contributions from your employer.
What To Do In Your 30s
30s is a busy time personally and professionally. You’re getting promotions at work and maybe thinking of getting married, starting a family and buying your first home. With these life goals also come costs and stress to meet them. You can start off with retirement planning by doing these three simple things.
- Review your loans and expenses
- Become a member of your company pension scheme ASAP
- Think about long-term investments
First things first, reasses what debt you’ve taken on and how best you can repay it. Ask yourself this set of questions: 1. Do you have a spouse and children dependent on you? 2. Do you have sufficient savings for a ‘rainy day’? and 3. Are you looking to purchase land or a house? Retirement planning is striking a fine balance between saving for the future and clearing off unsecured debt like credit cards and personal loans.
Second, make sure you join your company pension scheme and don’t get left out of it. At this point, explore your retirement planning options as much as you can. Your employer will likely make contributions to a fund on your behalf. Do take an interest in how the money is being invested and go for tailored investment options rather than the default.
You can afford to think about long-term investments in shares. The saying, “shares perform better than savings accounts in the long run” still holds true.
Retirement planning is not only about building up a big pension fund but also about keeping your budget under control and paying off debts.
What To Do In Your 40s
40s is when you’re financial position is often at its best and you’ve already built up retirement savings. If you haven’t, it’s better late than never! It’s imperative that you engage in retirement planning now so that you won’t regret later.
- If you haven’t started saving just yet, what are you waiting for?
- Keep adding to your Isa
- Dedicate your peaking earnings to a pension
Having an Isa account with substantial savings is the least you can do for retirement planning. Keep making contributions to it and build up on tax-free savings. You also need to plan for when to retire and how much income you would need in your retirement years. Accordingly, increase your contributions.
As pay raises and bonuses give a fillip to your retirement savings, you’re likely to be on top of your debts. Instead of recklessly spending your salary, it’s wiser to take retirement planning seriously and paint a picture of how you want retirement to look. But, think in broad terms for now and bring your financial plans on track.
What To Do In Your 50s
Perhaps you’re already working out finances in relation to retirement planning. This decade is the most important of all.
- Maximise your contributions
- Prevent risking your pension investment plan
- Use a SIPP for greater control in your hands
Firstly, do you have a retirement date in mind? Calculate how much ‘minimum’ and ‘nice to have’ income you want. Next, look at where your pension is invested and position that fund for your choice of retirement planning option. If you’re planning to purchase annuity after retirement, phase out volatility from your pension fund. This will help prevent a dip in value before you even take benefits.
Also, disinvest from risky equities and put the same into safer cash investments. Hopefully, you’ll have stored up a big pension fund by the end 50s. Hence, use a SIPP (Self Invested Personal Pension) for greater control on retirement planning.
How to find the cheapest SIPP
You should seriously consider maximizing your contributions if you’re a higher rate taxpayer. Growing-up children who need financial support may hinder you, try your best to strike a balance. You won’t have too many chances.
What To Do In Your 60s
The government is set to restrict employers from forcing their staff to retire at 65. So, if you’re fit and able to work, you have even more time for retirement planning and topping up your pension pot. This decade will see you taking important decisions regarding cash and income in retirement.
- Check whether mortgage and other debts are in order
- Decide whether buying annuity is a top priority or you prefer a drawdown
- Seek professional advice first
Annuity is like reversed insurance. You entrust your pension to an annuity provider who then pays you a monthly income for the rest of your life. Smokers and people with chronic illnesses qualify for enhanced annuity. Nowadays, an Unsecured Pension is becoming increasingly popular.
Start retirement planning well ahead of your relaxing years so that you can lead a life of enjoyment and luxury without worrying about the money.