Retirement is one of the most important milestones in your life, and so it is vital that you prepare for it in the way that you would any big life event.
By preparing in advance, you can be sure that your transition into retirement will be as smooth and secure as possible, with the right funds behind you.
- Save from the Start
Firstly, it is important that you begin to save from your very first wage slip. Even if you are self-employed, you should set up an independent pension fund in which you can save money towards your retirement. This will not only ensure that you have enough money come retirement, but that you can take advantage of compound interest rates. For example:
- Someone that saves £100 a week for 40 years will have £120,000 in their account.
- Someone that saves £200 a week for 20 years will only have £75,000.
If you need more advice on the advantages of saving over time, Portafina can connect you with an expert who can talk you through your options.
- Save Alternative Pensions
Many people do not realize the extent of the state pension, and believe that they will be able to survive on this alone. However, state pensions are £115 a week, or over £6,025 a year, which many people would struggle to live on, especially if you are looking for luxuries.
Rather than live off this small sum, you should ensure that you set up alternative pension schemes to contribute to throughout your life. If you want to find advice in setting these up, you should check Portafina’s Facebook, Twitter, YouTube, and LinkedIn accounts for the latest information.
- Do Not Solely Rely on Equity
People that do not prepare for retirement will often find themselves relying on their home’s equity to see them through. However, there are many possible negative effects of releasing equity in retirement, such as adverse effects after your death and getting less than the market price for your home.
- Buy Annuities on the Open Market
Instead of buying annuities from the closest pension scheme, you should consider looking at annuities sold on the open market. These will often be better deals, and once you buy an annuity, you can not often turn back – so you should make sure that it is the right deal for you before you buy.
- Auto-Enrol on Your Workplace Pension Scheme
It is now compulsory for employers to auto-enroll you onto a workplace pension scheme once you have been working in a position for long enough. Employers must pay 0.8% of their revenue into pension schemes, and so utilizing this will increase the amount that you are putting aside. Not only this, but you only pay 0.2% tax on your contribution, and your employer pays 1% at the moment.
- Track Your Pension’s Growth
If you open your pension and leave it to grow over time, chances are there may be changes to regulations or your circumstances which could affect your pension’s growth. To minimize the effect of this, you should check your pension’s increase often to ensure that it is growing at the rate necessary to secure your future. Disclaimer: Please be aware that the above information is not financial advice. For any financial decisions you need to make, please make sure you talk to a qualified financial advisor.