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The Ultimate Guide to Planning for Retirement

27 May 2015 No Comment

canstockphoto3351708Although some of us love our jobs, practically everyone spends their working days fantasising about retirement. You won’t need to work anymore, and you can do what you want with the rest of your life. But the reality of retirement could be very different from how you imagine it. Apart from possibly finding yourself with nothing to do, you might also realise that you don’t have enough money as you had hoped. Some people reach retirement age only to realise that they can’t afford to retire. Or that they’re going to have a lower quality of life than they hoped. If you want to be prepared for retirement, you need to start thinking about it sooner rather than later. Consider some of these factors in saving for your retirement, from how much you need to how to get it.

Making a Retirement Budget

It’s not that easy to work out how much money you’ll need to live on once you retire. You could need enough to fund about two decades of retirements. Many people aim to have about £100,000 in their pension pot, but even this will not give them a lot of money for that amount of time. Working out your expenses isn’t an exact science, especially as prices could change between now and then. But you think about what your expenses might be and try to account for inflation. Hopefully, your budget for retirement will be lower. You won’t need to pay for things like commuting to work and perhaps mortgage payments or rent. You will hopefully still have the benefit of things like fuel allowance and bus passes too.

Pensions

The new state pension will be no less than £151.25 per week (the actual amount will be announced in autumn 2015). That gives you an amount of £7865 per year. Of course, your actual pension amount will depend on your national insurance contributions. You need to contribute for ten years before you can get the state pension. You need to either earn at least £155 a week or be self-employed and paying national insurance. You can also get the state pension if you get national insurance credits or pay voluntary contributions. If you want to know how much your might get from your state pension, you can get a statement for an estimate.

On top of your state pension, you can also take out a private pension. It doesn’t affect your state pension, so you’ll get extra income. Some employers offer workplace pension schemes you can join. But if yours doesn’t, don’t hesitate to take matters into your own hands. You can start contributing toward a personal or stakeholder pension. You can get tax relief on the contributions you make too, but check that it’s registered with HMRC.

Personal Savings

As well as putting money into a pension scheme, you can also start putting aside some personal savings. This option is a good idea if you’re in your twenties and perhaps have just started your first full-time job. Open an ISA (individual savings account) to begin saving some money each month. Shop around for the best interest rates to make sure your money is working as hard as it can. You can currently save £15,240 a year and earn tax-free interest.

Investments

Aside from savings and pensions, you can also start making investments in other ways. There are lots of different things you can invest in. And it can be difficult trying to decide what’s worth putting your money toward. Should you trade stocks and shares, buy gold or even invest in something unusual like art? Everyone will make different decisions based on what they think is best for them, but you can get lots of advice to help you. For example, this comprehensive guide to purchasing precious metals in IRA will help you decide whether gold and silver are worth investing in. You can use ISAs to invest in stocks and shares without paying tax on your returns. You might also decide to dabble in forex trading or with other markets. Think about what your aims are and try to consider the long-term results you want from your investments.

Property

An attractive thing to invest in, on both a personal and business level, is property. While many people purchase buy-to-let properties, just buying your home will help you in retirement. Once you have paid off the mortgage, you will no longer have to pay for somewhere to live. You might also be able to downsize, selling the home you have invested in and buying somewhere smaller to help you fund your retirement. Retirement properties can be a lot cheaper than others, so moving after you retire could be a good idea. Of course, you can also invest in other homes to rent or sell. For example, you might rent a house to long-term tenants or a holiday home to tourists. If you have managed properties as a landlord, you could also sell them in retirement.

Ongoing Income During Retirement

Of course, you might not want to give up working completely when you retire. You will have income from your pensions and investments, but perhaps you don’t want to stop working. You could include part-time employment or even running a business in your retirement plan. But remember that you won’t necessarily be able to do it forever, and you need an idea of what would happen if you could no longer work. It’s best to look at working after retirement as a means to bring in extra income for luxuries. Don’t rely on it as something that will pay for your necessities. It’s better to have more passive forms of revenue, whether it’s a pension or rent from a second property.
Retirement might seem like a long way off for many, but once it starts to approach it can be too late. It’s better to start preparing as soon as you can. You’re unlikely to regret putting aside more money for retirement when it’s finally time to quit working. Start working on your retirement plan now for a better future.

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