Help To Plan For Your Retirement
Whilst most of us don't expect to have to work beyond the standard age of retirement & expect the government to fund our retirement via the state pension, sadly because of the rising cost of living & longer life expectancy, this can no longer be the case. People are needing more money over longer periods of time so you need to take drastic action now to prevent not having enough to get by on later on in life.
As with the majority of my posts, the following tips are aimed at people living & working in the UK, however you may be able to use these helpful tips wherever you live in the world.
Please bear in mind these tips are from my own experiences & those of my friends/family only.
Nothing can replace good advice from a properly qualified financial advisor.
The most common & widely used way to plan for retirement is through a pension. This can be through your employer or a personal plan from institutions such as banks.
A pension plan is basically a savings account that you pay into during your working life to enable you to draw an income when you retire. To make sure you have a good enough pension plan to live a comfortable life when you retire, you need to do some serious saving. The government suggests you save about 10% of your earnings each year, this can amount to a huge amount, of money which few people can actually afford.
That's where employer/employee pension plans come into play.
If you are a local/central government worker, civil servant or emergency services employee, relax. You're taken care of. You are one of the few people left with access to the final salary scheme.
Basically, provided you put in full service (at least 30 years), your pension will be linked directly to your salary in the year you retire. Hence the name.
A more common scheme is the contribution scheme. Basically its made up of up to 3 parts. You contribute, your employer contributes & the taxman contributes (usually by way of tax allowances).
Why should I get a pension?
It's a very efficient way to save for your future.
The stock market (which pensions are typically invested in) usually provides the highest returns on your investment
Its harder to get access to your money before you retire, basically removing the temptation to spend the money on something else.
Helps some way to fight poverty in your old age (something a lot of current pensioners are currently experiencing).
The amount you are charged in fee's are higher than any other type of investment plan.
Not very flexible in respect to how you get your money once you retire.
Because pensions are usually invested in the stock market, it's hard to estimate what your plan will be worth in 10, 20 or 30 years down the line.
Are there any alternatives to a traditional pension plan?
There are many different ways you can save for your future.
Premium Bonds - You don't earn any interest on your money, however you are entered into a monthly prize draw where you could win upto Â£1m.
ISA - This is a government encouraged savings scheme. Basically it's a high interest - tax-free savings scheme. Your tax-free allowance is Â£7000 per year per individual. If you are married or with a partner, it's a good idea to split the money 50/50 in both persons names to ensure the maximum tax-free allowance. ISA accounts are only a good idea if you leave the money in the account for the full period to earn the maximum interest. Keep an eye on what the other financial institutions are offering by way of interest. If you find someone offering a more competitive rate than your current supplier, you are entitled to switch to the better account
Property - A recent rise in the buy-to-let market is a direct result of people buying homes with a view to earn an income off the rent. You must of course ensure you are able to charge enough to cover any mortgage payments & still take some earning. Over time, property prices usually rise quite a lot so you should also make a good return should you come to sell the home at any time in the future.
Please only use these idea's as a basic guide. I as the author, nor Infobarrel as the publisher, cannot be held responsible in any way whatsoever for any financial losses made as a result of following these tips. If in doubt, always seek advice from a qualified & certified financial planner BEFORE you invest any money.
Good luck & I hope with some of the helpful hints in this guide, you have a happy retirement.