Important things to know
Guest post by Annie Button
The current state pension is £168.60 per week and the majority of people are eligible to claim it after 35 years’ worth of National Insurance contributions. However, many people need far more than this to live, and if you want to enjoy your retirement in comfort you will need to start making plans for saving.
Here we take a look at some of the most important things to know if you want to save for a comfortable retirement.
Start as soon as you can
The truth is that it is never too early to start planning for your retirement. The more that you can save, the earlier you can retire and the more comfortable that retirement will be. Whether you are in your 20s, 40s or even 60s, the perfect time to start saving for your retirement is right now.
Clearly depending on when you start saving, and when you are planning to retire, you will need to achieve different levels of savings. But the crucial thing to note is that if you can afford to set aside your money, you should do so. This money can be later invested in property, or put into a pension scheme.
Understand what you’re going to need and have a target
It is important to have a target in mind when you start saving for you pension. A great idea is to plan an ideal retirement age, and establish how much money you would need in order be comfortable throughout your retirement. This provides you with a goal for your savings and pension contributions, and shows you want to you need to do in order to achieve it.
Take advantage of your workplace pension scheme
It you are older than 22 and you are employed, your employer is legally required to provide a pension scheme that you will be auto-enrolled in. You can choose to opt-out of the pension scheme (meaning that you won’t pay any employee contributions out of your pay) – however, it is unwise to do so. When you contribute to your pension scheme, your employer must contribute at least three per cent of your salary on top of your savings.
This is effectively a pay-rise on which you won’t pay any tax. So, unless you have something very specific that you are going to be using the money for, it makes sense to continue with your auto-enrolled pension scheme, and even up the payments if you can. Some employers will generously match you contributions to a higher percentage if you are willing to save money.
Take independent financial advice
Remember that everyone’s fanatical situation is different, and things can get very complicated when it comes to saving money for your retirement. With no simple, one-size-fits-all solution, it is becoming increasingly necessary for individuals to take independent financial advice on their best options for saving and planning for their pension.
Independent financial advisers can take a look at your specific situation and make recommendations on the best course of action to save money and add to your pension. You are never too old to make changes to your plans, so there is never a bad time to take advice.
To invest or to save
Fundamentally when you come to plan for your retirement you face a choice with what to do with your money. You can either choose to save your money, or you can choose to invest it. Remember that in any case you need to treat your pension as a priority despite any other financial circumstances in your life – you will reap the rewards for this later.
Saving your money is the safer option, but be aware that due to issues such as inflation, money simply saved will actually reduce in value. Of course, investment your money comes with some risk, whether you put your money into a savings scheme or invest in something directly such as property, there is always a chance you could end up with less than what you put away.
Even if retirement feels like a long way off, it is a great idea to get as clued up as possible so that you can start making informed decisions about your future. This approach will pay dividends in the long run.