Building up a significant pension income is essential to have a happy retirement - certainly in terms of financial security, but also mental health with the peace of mind that you have enough money to live off without working. What strategies should you adopt if you want to be wealthy and able to live life your way once you reach retirement age?
Start Early
The earlier you start saving for retirement, the better. Beginning in your twenties is best since you can grow your capital at a compound rate over the following decades.
Given the high cost of living and stagnating incomes, saving during this period of life can be challenging. However, even setting small amounts aside (like £80 per month) can make a substantial difference to the funds you ultimately end up with in your pension pot.
Don’t rely on the state pension. While the UK government pays out for people with ten years of national insurance contributions, the amount is only £221.20 per week, which is roughly what’s needed to cover basic living expenses.
Look Into Retirement Savings Options
Another pro tip is to invest money into tax-shielded vehicles, like stocks and shares ISAs or SIPPs. For ISAs, you currently have a £20,000 annual tax-free allowance, while with SIPPs, you can’t access the money immediately, but you don’t pay income tax on it when you withdraw at retirement (up to a threshold).
Define Your Goals
Lastly, think about your retirement goals. What do you want to do in your life once you finish work?
If you plan to live in your current home or move to a country where the cost of living is cheaper, your savings requirements will be lower. However, if you have expensive hobbies or want to cruise around the world, you will require more funds.
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