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Should You Start Saving For Your Retirement In Your 20s?

2 March 2018 No Comment

For most of us twenty-somethings, retirement seems a long way off. With the retirement age constantly rising, many of us may be waiting until we’re seventy to finally give up work. The idea of starting a retirement saving fund in our twenties might seem overly hasty, but what if it was actually prime time to start saving?

Retirement is a time for treating oneself after a lifetime of hard graft. Many of us spend much more on a monthly basis in retirement than we would have whilst working. The problem is that the average pension doesn’t allow us to live this lifestyle. This can cause many retirees to eat through their pension pot in the first three years, only to later end up in debt. Saving up a retirement fund could help with debt – in fact, it could prevent getting into debt at all. By having more disposable income in retirement, we can all enjoy the eve of our life to its fullest.

Saving up early makes practical sense. You can save up more in the long run and pay savings in smaller instalments. By putting this money in a special trust, these savings can collect interest over the years. You may not even have to contribute anything to these savings eventually as the interest alone will provide a steady income into this account. Of course, this involves shopping for the best savings account as well as keeping an eye on interest rate changes and placing the money elsewhere if a better deal can be found.

The big drawback to saving up for retirement is that none of us know how our lives are going to pan out, making it a risky investment. Some people reach retirement age and go on to live thirty plus years. To live this entire stage of life in luxury could require saving up hundreds of thousands. On the flipside, there’s always the morbid possibility that some of us won’t see retirement at all. The idea of saving up thousands of pounds, dying early and never being able to use it is a depressing thought that puts many people off saving up – it’s money that they could be spending improving the quality of the life that they have.  

A way around this could be to develop a retirement plan which doesn’t involve a savings account – instead it could involve investing in an asset such as property. By climbing the property ladder, getting a big house and then downsizing to a small house in retirement, you’re left with a profit of several thousands that can be used to fund your retirement. This gives you something that you can use and enjoy during your working life as well as your retirement, making it easier to rationalise. There may be other things that you can invest in and sell to fund your retirement such as selling a business, selling shares or investing in expensive collectibles. You could even buy property to let and make money this way.

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