General saving Tips for retirement
Saving for retirement is a long term investment and like any form of investment there will be some level of risk involved so it is important that you take the necessary steps to ensure you are making financial decisions that best suit your needs.
A good starting point is to contact an independent financial advisor (IFA) who can provide you with necessary advice to help you decide on the best options for you.
It is never too late to start saving but the younger you start to save, the better. Saving something rather than nothing, even if this amount is very small, enables you to get into a good savings habit early on which will then hopefully carry on through to retirement. If you are thinking about setting up a pension, ISAs (Individual Savings Account) are a good way to practice the process of saving before setting up a pension fund.
If you want to get the best out of your retirement a good way is to focus on clearing any outstanding debts as early as possible when you are young. For example, people in their twenties should focus on clearing debts such as student loans or credit cards and then look towards covering any other financial responsibilities such as living costs to see what money is left available to put towards savings.
Saving small amounts regularly can be a very effective tool for putting money aside for the future. Try to put aside only want you can afford each month rather than overstretching yourself as you will often find that these small contributions can go a long way in giving you a nice tidy sum to eventually retire with.
Setting up a pension plan provides an excellent savings vehicle for retirement. You can only withdraw from your pension pot once you reach state pension age so this has the advantage of preventing you from spending money which may have been unnecessarily spent otherwise. This also allows you to have some form of income to live off of when you are no longer able to work.
You can also take advantage of the tax relief available on pensions. Up to 25 per cent of your pension pot can be offered as a lump sum so when you contribute into a pension you immediately receive tax relief on your contributions. This means that you will not have to pay tax for the income you are putting aside towards your pension.
Company pension schemes if available to you are a good way to save for retirement as the trustees are there to look out for your best interests therefore taking away much of the hassle of setting it up yourself. The two main schemes available are called ‘defined benefit’ and ‘defined contribution’.
If your company offers a work pensions scheme this is a good way to start saving for retirement as this takes away the hassle of having to set one up yourself. But make sure you understand the terms and conditions associated with your type of fund and that your employer provides you with all the relevant information.
You can even set a pension for your children or grandchildren to give them a head start in life and better prepare them for the future.
A pension calculator is a very useful tool to help you work out a feasible amount you wish to put aside to ensure financial wellbeing during retirement.
There are a number of savings options available to you if you do not wish to set up a pension. But it is often beneficial to set up alternative investments alongside a pension as a form of supplementary income.
For example, if available, you could cash in on insurance policies or sell investments to help pay for retirement. You could even consider selling your home or downsizing if you have children that have left home for instance, as the money tied up in your home can provide you with some extra income during this time. However, before making such drastic decisions, be sure to carefully review your options by seeking professional financial advice.
ISAs (Individual Savings Account)
Another way you can start to save is through setting up an ISA. These give you tax free contribution payments as well as allowing you to have greater control over your money as opposed to a pension where the funds are not accessible until you reach retirement age. You can even use the money accumulated in this account to put towards your pension pot in the future.
In some cases people may argue that pensions are a better way to save but it entirely depends on you as an individual and which option you feel is best for you. If you want to get financial advice about your savings options you should contact a financial adviser to help you further in your planning and money management.
When considering how much money you will need to put away for retirement ask yourself some key questions: What will be your costs of your day to day living? What sort of things do you want to do and enjoy? And what expenses will you have? E.g mortgage repayments, children, grandchildren?
You can always use the pension calculator tool to work out the exact amount you will need to put aside in relation to your income and budget.
Remember it is never too late to start saving so start now by setting goals and sticking to them!