The world’s population is ageing, fast. We’re making increasingly health-conscious choices, and many of us are living well into our eighties and beyond as a result. That’s great – but it means we have a significantly longer retirement to save towards than our parents did.
Making sure you’re prepared can seem a gargantuan task. But fear not – it doesn’t have to be scary. You can ready yourself for your later years with just a few small lifestyle changes. Here they are:
1) Start early
It’s never too soon to think about the future. Beginning to save in your twenties could really make a difference forty or fifty years later. Of course, money is often tight when you’re young, but every little helps.
If your employer provides a pension plan, then increasing your personal contributions by just one or two per cent could be enough – and many employers will match that contribution themselves. An alternative could be to set up a standing order for funds to be transferred straight from your main bank account to a savings account on payday, so it’s done before you even think about it.
2) Look forwards, not back
Even if you’ve found yourself in a difficult financial situation until now, there’s always time to make a change. Tackle your most pressing financial responsibilities first, and bear in mind that your income usually increases as you grow older. Stay confident in yourself.
3) Set targets and stick to them
You need to be realistic about what you can save. So calculate how much you need to get through the month, put away what you can afford to, and be consistent. There are a number of free retirement planning tools available online which can help you with this.
If your income increases, of course, so too should the proportion you squirrel away. It’s always good to ask yourself: is there an expenditure you could do without? If so, put it towards your fund instead.
4) Take the help on offer
There’s an abundance of free, professional advice on offer for savers. Pensions Wise and the Pensions Advisory service can give you impartial guidance on your situation, as can the Money Advice Service. Websites like MoneySavingExpert.com, meanwhile, give an overview of the investment options available, and explain in layman’s terms what some of the more complex sounding jargon really means.
5) Pay off any debts first
It goes without saying that credit is often expensive, and saving for retirement while you’re still paying off high-interest debts means you’re not actually putting yourself in a better position. So be sure to pay off any personal loans, credit cards, car finance and so on first.
Consider whether it would be feasible to pay off your mortgage early too; a little less disposable income now could stretch a lot further later on.
6) Balance your portfolio
Interest alone is unlikely to deliver a significant return in the long run, so it’s worth taking on other investments too. Balance is the key here; a little risk can reap a handsome reward, but too much can be ruinous. So don’t place all your eggs in one basket.
The more you spread your money around, the more you insulate yourself against factors outside your control. Property is a reasonably safe bet, although the market can of course fluctuate. Buying up bonds can be fairly dependable too, while those prepared to a take on a little more risk should consider dividend-paying shares. Many investors get started using an online trading platform like CMC Markets.
7) Shop around and ask an expert
Whatever type of investment you opt for, you’ll find yourself inundated with potential options. Most savers would be well advised to consult an independent financial adviser (IFA) for a professional opinion on which scheme is the most suitable. IFAs aren’t cheap, but the fee they take for their service is negligible compared with the amount you stand to save if you have the right information.
8) Don’t touch your nest egg until you need to
This one’s a no-brainer. Yet it’s surprising how many savers choose to withdraw some of their retirement savings in their fifties and sixties. Sure, the Ferrari’s tempting – and it looks fantastic in black – but a happier retirement is worth more.