It’s never too early to start planning for retirement, in fact the earlier the better. If you delay planning for retirement by a decade, you will have to double the amount you invest to make up for the lost time. The sooner you start adding to a pension, interest can occur and it’s better to allow ample time for interest to accrue.
As we are currently heading towards a greying society, there will be less people paying national insurance and therefore there won’t be enough to contribute to a state pension. Even though you may be making national insurance contributions now, you are paying for the state pension of today. When you come to retire, it is those that are currently working that will pay for you. Therefore, it is vital that you ensure you don’t rely on a state pension to see you through and start planning today.
Depending on your age there are various ways you can start to begin planning for your retirement:
In your 20’s
When your in your twenties other things will probably take priority over planning for retirement. If you have any existing debt, such as student loan or overdraft, think about paying this off to start with. If there’s enough left then start saving this, even £50 a month will have a major impact when it comes to retirement, as your contributions will have longer to grow. One of the best places to put your savings is into a tax-free Isa. Like ISA’s pension contributions also get tax relief.
In your 30’s
Explore your debts and outgoings and establish if you have any money to realistically spare. Financially this may be a busy decade if you’ve bought a house, are getting married or have a family. One of the first things you should do is see if your company offers a pension. Many companies will also contribute to this which is an extra helping hand. It’s almost like a pay rise on the spot.
If you’re in your 30’s you can take on more risk at this stage. Consider buying into shares as there is a high chance this may pay off.
In Your 40’s
In your 40’s your earnings may be higher than your 20’s and 30’s so you should definitely be dedicating some of them to a pension. Ideally by your 40’s you should have built up some retirement savings, whether this is through a company pension or a personal pension scheme. If you haven’t already started you will need to put more money in. If you’re unsure where to better put your investments try out an investment calculator.
This is the time you should be taking retirement planning seriously and this means having a target retirement age and working out how much you will need to live on.
In Your 50’s
This is the most important decade in terms of retirement planning. Think about maximising your contributions while you can. You should have established your retirement age as a guide. Then from there you can calculate how much you want to live on and work out the amount of time you have to save for it.
If you have investments than you need to take a detailed look at whether you’re investments are working for you or if you should move.This is when you shouldn’t be taking major risks. If you have any high risk investments, it’s a good idea to take it out and put it into safer investments. Try out the pension wizard to see if your investment strategy is right for you.
Planning for retirement is about more than just saving for a pension. Ensuring you have your debts cleared and your mortgage in order, is just as important.