It’s better to start planning sooner rather than later
Fancy surviving ice-cold winters without heating? Or rummaging through value ranges at the supermarket for cheap reconstituted meat every week? Didn’t think so. Unfortunately, that’s the prospect for millions of people who have reached retirement but who will have to make do on the measly basic state pension, after having failed to plan effectively for their retirement years.
The stark reality is that putting something aside for old age has become an unavoidable necessity these days.
No matter what age you are currently, the best time to start planning your retirement is right now. Every year that you let slip by without doing anything is another opportunity lost that puts more pressure on you to make the right decisions in the future.
To put it simply, you can expect to save a lot more money in 30 years than you can in 10 or 20. Therefore, every single year that you are saving for your retirement is going to boost your funds and, potentially, your lifestyle in the future too. This is especially important if you are planning on retiring early, but “start planning for your retirement now” is really a sound piece of advice for everyone at any stage of life. You can save up a lot more if you start at 20 or 30 than if you do so at 50 or 60.
Yet, it is also important to not feel too down-hearted if you have left it a bit later before starting to plan and save. It is still far better to begin to save and plan rather than give up because you feel that there isn’t enough time left to do it well.
Saving something, however small, is better than saving nothing during the first years of your working life. Starting a pension early is a great way to build up a bigger retirement fund for later in life, as you add more contributions over your lifetime and they have longer to grow. Even if you can only afford a small amount, it puts you in the frame of mind to continue a lifelong savings habit.
Be aware of your investing options
One of the best places for younger adults to put savings is in a tax-free savings wrapper such as an ISA (or an IRA in the US). These schemes are provided by the government to allow you to save money without having to worry about the gains from your investments being eaten up by income tax. Whilst an ISA generously allows all money held within the wrapper to be withdrawn tax-free, it is still taxed at source when you get paid. A SIPP (Self Invested Personal Pension) on the other hand, provides tax relief at source, so that you pay tax on the way out of the wrapper, but not when it goes in.
The age at which you start planning for your retirement is going to be directly related to the success that you have in building a sustainable pension pot. It will also determine how you go about it too.
For example, if you have time on your side you may decide to take a few more risks in the hope of earning more money in the long run and knowing that there is still time to make changes to your tactics. On the other hand, if you only have a few years to go before you retire then it is probably going to be easier to take the safe and steady option instead and steer clear of investing half your pension pot into a hot new technology company.
The point is, of course, that if you’re young then before you do anything else, you need to start planning for your retirement. Just putting some money into whatever account you have open now isn’t going to see you meet your goals in a planned and orderly way.
What’s the best approach to retirement planning?
So, how will you go about this planning stage right at the very beginning? Well, there are a number of different ways of doing it depending on your wants and needs.
Perhaps the best approach is to speak to some older people who are already retired, to ask what they now think they should have done differently. If you have older relatives or neighbours in this situation then it is likely that they will be only too happy to help you reach a sensible decision.
By putting in the time to sort out this matter now you can then pretty much forget about it while your savings build up, apart from carrying out some regular reviews of how things are progressing. This is going to be far better for your stress levels and general happiness than worrying endlessly about when to get started. There are few worse situations to be in than that of feeling that your future has slipped out of your control and there is nothing that you can do about it. However, feeling that you have taken control and know exactly what you are doing is a tremendous feeling that you will love.
These days there are also plenty of options for you if you need some extra help with the planning stage. You could look up some internet blogs and forums on the subject to get some ideas, for example.
Another way of proceeding is to speak to a financial adviser on a face to face basis, which can be a good move if you feel that you don’t have the time or confidence to do all the research on your own. These people are professionals who are experts in helping others make the right investment decision, although you should be aware that some of them many only be able to offer products from a certain company that they are affiliated with.
Whatever you do in the end, this planning stage is simply too important to rush through or to avoid altogether. If you don’t put the time and effort into it now then it is sure to be something that you look back on with regret in your later years.