It’s an old cliche to say the best time to start saving is now… but it’s true, especially when investing money that you hope to use in retirement.
And, whilst we have good intentions, the harsh reality is that few of us are saving enough. Even fewer have a retirement investment plan in place. The good news is that making a plan, and beginning to save and invest, is simple.
Here are a few pointers on how to get started.
Build your retirement pot from different sources
The first thing to understand when planning your retirement is that there are different ways to save and invest.
First, you’ll likely be registered for a UK state pension and your employer will have enrolled you on a workplace pension scheme. This is a legal requirement so, if employed, you’ll be contributing. As part of taking a more structured approach, assess what your state pension will be (given your age, job status etc), what you’re contributing and what it’s invested in.
The second way to contribute is if you own a house or have a mortgage. Many people use their home as part of their retirement plans, for example, as they plan to downsize or use equity release in retirement. So make this a part of your planning too.
Thirdly, you can set up a personal pension. This might sound daunting but it’s straightforward and can make all the difference, especially if set up in addition to the two options above.
We’re going to explore how you get going with a personal pension plan below.
Make a plan
The easiest way to begin investing in a personal pension is to work out how much income you will require in retirement, how much you should be contributing, what structure you should use and what you should invest in. Making a retirement investment plan should be as simple as making a savings plan of any kind.
In a future blog post, we will dig deeper into the specifics of making a personal retirement investment plan but the trick is to remember, as with any plan, that you should start on putting it into action as soon as possible.
Some simple steps to get started
Here are 6 simple steps you can take that will start you on the road to a happy retirement:
Use the correct account type for your money
When starting a retirement investment plan, assess what’s the correct account type for your saved funds. Your needs might best suit a regular investment account or an ISA, which will give you tax-free growth, year on year. You might also consider opening a SIPP (a Self-Invested Personal Pension) which gives you an easy opportunity to invest in a very wide selection of securities for your retirement in a very tax efficient way.
Keep your investment costs low
Planning for retirement means saving for the long term. Hence, it’s important to invest in investments that won’t get eroded by large fees.
Let automatic investing do the hard work for you
The best way to save is to make saving a habit. And habits become unbreakable when you forget you’re doing them. Hence, the best way to save money is to do it regularly and automatically. And the easiest way to do this is by setting up a direct debit to an investment platform who will invest the money for you on a regular basis.
Keep it simple
With plans that you want to keep, it pays to keep it simple. So, when you think about a retirement plan, pick investments you understand, learn a little about what you’re investing in and work with people you trust.
Be wary of scams
Unfortunately, as with so many elements of finance, when thinking about starting a retirement investment you should be wary of scams and fraudsters. If you’re going to begin exploring how to contribute to a pension or open a SIPP, make sure that the provider is credible, compliant and overseen by the appropriate regulator. If any doubt, seek reassurance from a professional financial advisor or from the FCA.
Start small but start now
Tall trees grow from tiny seeds – and that’s true of long term investing. The trick to saving a healthy retirement pot is to start small but start now.
Keep on track
As with all of the best-made plans, it’s important to regularly check you’re still on track. So plan a time every month to review how your retirement saving is going. With some preparation and attention, you can keep your retirement planning on track, even from an early age.
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