Planning your retirement is especially important now that we’re living longer; many of us can in fact look forward to an active retirement over a number of years. Putting the right plans in place will help you build a suitable retirement fund so that you can make the most of this stage of your life, and enjoy the financial freedom it can offer.
The ideal age to start retirement planning
Simply put, the earlier you can start planning for retirement the better. Think about how you want your retirement to look, so that you can put in place sensible steps to get you where you want to be. General guidance can be useful, and an accepted ‘rule’ when working out your pension savings is to set aside half of your age: so, if you start saving at age 30 you should aim for 15% of your income, whereas if you start saving at 40 it’s 20%.
Benefits of starting early
The main benefit of starting your retirement planning early is that you’ll need to set aside a lower proportion of your income each month into your savings. You’ll also have more time to make your plans and enjoy any benefits which compound interest can add to your pensions and investments. Starting early also gives you more scope to be flexible as life events, such as buying a home or taking a career break for a family, take priority. Your current income, financial position and arrangement need to be considered when putting your plans in place, and common sense is of course needed. In reality though, the sooner you get into the habit of putting aside some of your income for the future, the easier it becomes.
Increasing contributions if starting later in life
More than a quarter of people over the age of 50 don’t have a private or company pension. This increases for women; a third of those over 50 have no provision at all. If you’re older and haven’t yet built up retirement savings there’s always time to get started. You may have to commit a greater proportion of your income into your retirement savings, but even if you’re in your 50s you may still be able to save for another 15 years or more, using bonus payments, or re-directing other money when it’s sensible to do so, such as when you pay off your mortgage.
Where should I save my money?
There are two main pension options – a company scheme, where you and your employer contribute or personal pensions where you save on a sole basis.
Different types of these pension schemes exist, with varying benefits. Other options, including SIPPs (Self-Invested Personal Pension) and QROPS (Qualifying Recognised Overseas Pension Schemes) may also be possible based on your own personal situation. Don’t forget any retirement investments must offer you the right level of protection, in line with your own attitude to risk.
Why prioritise your retirement
Prioritising your retirement gives you more opportunity for financial freedom in later life. Ultimately the longer your money has to grow the better position you’ll be in. Starting early may even allow you the opportunity to retire earlier than you’d originally planned.
Basics of saving for your retirement
There are a few key considerations to bear in mind when saving for your retirement:
- Think about what your ideal retirement looks like – do you have an age in mind, or would you prefer to ease into retirement by scaling back earlier?
- Consider where you want to retire – will you be based in the UK, overseas or a combination of the two?
- Factor in any estate planning preferences – will you sell the family home to fund your retirement, or would you prefer to leave it to your beneficiaries?
- Ensure your plans are tax-efficient – have you taken steps to ensure that your retirement income uses all available tax allowances or reliefs?
- Don’t forget healthcare – have you made adequate provision for long-term care?
- Revisit your plans every three to five years – your circumstances will change over your life so it’s important to review what retirement planning you have in place, and flex your plans to suit
How The Fry Group can help
With teams across the UK and overseas we can help support you at any stage of your retirement planning process. We can help you review your existing pension arrangements or establish a good retirement plan for the future. For help and advice please contact your nearest office.
Would you like to find out more?
We are here to help with your estate planning requirements. For more information, whatever your circumstances, please contact us today.