Looking to make the most of your golden years without any money worries? Check out our 7 essential tips for retirement saving
1. Set a goal
How much should you be saving for your retirement? It all depends on when you plan to retire and what your expenses will look like. If you were born after 5th April 1978, you can retire at 68 and start taking money from your pension after turning 55. But no matter whether you hope to work beyond 68 or retire early, it’s important to set a savings goal that’s based on the amount you’ll need each year to fund your lifestyle. Consider how much money you’ll need to cover all the essential bills as well as any travel plans, hobbies, and unexpected costs that might come up during your retirement.
2. Plan for future inflation
When planning your retirement savings, don’t forget about inflation. The cost of living is likely to rise over your lifetime and the amount of money that you can comfortably live on today might not be enough by the time you retire. To give you an idea of how inflation can affect your retirement, according to the Bank of England, goods that would have cost £100 on average in 1999 had almost doubled in cost to £199.70 by 2021.
3. Start saving as early as possible
One of the most essential tips for retirement saving is to start early. Whether you choose a low or high-risk investment opportunity, the more time you have before retiring, the more interest you can build over time. Don’t worry if you can only save a small amount to start, it can really add up over time thanks to compound interest. It’s never too soon to start your retirement fund.
4. Stick to a budget
Putting a monthly budget in place might not sound appealing but it could make all the difference when saving for your retirement. The key to creating a good budget is making sure you leave room for fun. If you don’t give yourself space in your spending to splash out on small luxuries, your budget can feel more like a punishment than a helpful tool to prepare for your future. Cover your bills and retirement savings but also set aside funds for treats like a monthly trip to the cinema, weekly takeaway, or a Saturday night out with friends.
5. Automate your savings
A top piece of retirement savings advice is to automate your transfers. Once you’ve set your retirement goal and have a budget in place, it’s all too easy to find reasons not to stick to it. Unexpected bills, that new coat you can’t resist, or a spontaneous weekend away can all lead you to spend money before it can be saved. Automating the process and setting up a regular direct debit can help to remove the temptation. We recommend making sure the funds leave your account just after payday.
6. Pay off existing debt
If you’re choosing between paying off your existing debt or saving towards your retirement, it’s almost always better to clear your debts first. It’s all about interest rates. If you have a credit card or loan that charges interest at 20% but a retirement savings account that only offers 2%, then choosing to save rather than use spare funds to pay down your debt could end up costing you more overall. Working with a debt advisor can help you find the best balance between clearing debt and saving for retirement for you and your circumstances.
7. Explore your options
You have options when it comes to retirement savings. Choose the method that works best for you, your financial situation, and the risk level that you’re comfortable with.
If you’re employed, it’s well worth taking advantage of your workplace pension. This can be a tax efficient way to save for retirement as your employer will contribute to the plan too. You can set up a private pension if you’re self-employed and could also qualify for a UK state pension if you’ve kept up with your National Insurance contributions. Thanks to pension tax relief, as a basic rate taxpayer, every £100 you save in your pension will only cost you £80.
Alternatively, you can use a savings account. Cash ISAs, fixed rate accounts, and regular savings accounts all earn interest over time and, typically, the longer your money is locked away, the higher the rate of interest you’ll receive. Your savings account returns might not be as high as some other retirement options, but your funds will be relatively safe.
A higher risk retirement savings option is to invest. Both Stocks and Shares ISAs and Lifetime ISAs can yield great returns, but the stock market is unpredictable and there’s no guarantee that you won’t lose the money that you’ve invested. Starting early can help as the more time you have to ride out any fluctuations in the market, the more likely it is that you’ll come out on top.
Looking to pay off your debts and start saving for your retirement? Find out more about the debt management options available to you by contacting our friendly team today. Give us a call on 0161 8260 585 or send us an email here