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Help! I’m 50 with no savings. What do I do?
If you’re 50 and you don’t have any savings, it’s natural to feel anxious about the future. But you still have time to make money, save and invest. Don’t trust in state benefits. They’re being cut and you never know what will happen in the future. Make money now – your own money!
- Take a reality check
- Set a savings goal
- Go on a money-making drive
- Grab any pension your employer offers
- Invest wisely
- Consider equity release
- Have regular check-ups
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Firstly, you need to change the way you view your life and work. If you have no savings at 50, you’re probably going to have to work until you’re at least 70.
You might not want to hear this, but remember you’re not the only one. Lots of people are working longer these days and it’s not the terrible sentence it might seem. There are good sides to working longer:
- Working will keep your brain active and may help you to live longer.
- You don’t necessary have to work full time. A part-time job might be just enough to top up your state pension.
- After 65 you’ll pay less tax and no National Insurance so you can keep more of what you earn.
- Working can get you out of the house and meeting people. You might even meet someone special!
- You could find yourself setting up your own business and create a whole new world and life for yourself.
The age at which you retire is largely up to you.
It’s a good idea to work out how much money you’ll actually need in your old age, so you have a savings goal.
Put together a budget taking into account all the costs you expect to face in your old age, such as heating, electricity, water, council tax, food, transport, home repairs, clothing, holidays and gifts. We have a handy budget calculator for you to use here. If you’re not sure where to start, take a look at our article on creating a budget here.
Once you’ve worked out how much money you’ll need each year, multiply this figure by the number of years you expect to be retired. For example, if you plan to retire at 70, and are working on the assumption you will live until 100, you will need to multiply your yearly costs by 30.
You’ll also need to factor in the cost of care in the later years, should you become unable to take care of yourself in your own home.
One of the reasons we need so much cash to take us through our retirement is that a lot of us are living longer, but struggling to cope in our own homes once we get past the age of around 80. At this point many people end up in retirement homes, which can be expensive.
By the way, one way around this might be to decide to start your own mini care home. You could get together with a small group of six to 10 friends and agree to buy a large house you can all share, employing qualified carers, a cleaner and a cook for yourself, thereby cutting out the middleman… just a thought!
Even if you don’t decide to go this far, it’s good to plan ahead and work out what you’d do if you could no longer manage to cook and clean for yourself. There’s more advice on this topic in our guide to long-term care.
Once you’ve worked out the total income you’ll need to take you through your retirement, use one of the online pension calculators to work out how much you need to putting away each month to achieve this. These tools make certain assumptions about inflation and the cost of living, and as no one can predict the future it might turn out you need a bit more or less. However, this should give you a starting point to work towards.
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Next, you need to think about ways to make more money right now. No whingeing here! Being 50 is nothing. You have the strength, the skills and the resources to make money for yourself and you have very valuable life experience to help so go to it.
After all, you could find yourself creating a whole new life for yourself!
To make money on the side it depends how much time you can spare and what skills you have.
For example, if you’re a mum, consider becoming a doula. Doulas support women through childbirth and new parenthood, and can charge up to £500 to be present at the birth and £15 an hour to cosset a new mother in her home. British Doulas runs courses in London for women wanting to take up the role. Find out more about it in our doula article.
If you’re well educated – particularly in subjects like maths, economics and business – you could become a tutor and teach maths and English in the evenings. You can earn up to £80 an hour doing this. Dog walking is another option with a good hourly rate of pay (£10-15 per dog per hour in most places), provided you can handle more than one dog!
If you’re comfortable selling to people, network selling is another great money maker. It involves selling products through your network of friends and family on behalf of a direct selling company. It can be a great way to start a small business. The Direct Selling Association has more information. Also, consider signing up for market research or mystery shopping, both of which can pay well for a relatively small investment of time.
If you own your home, why not take a lodger? You can earn up to £4,250 tax free this way, and even smaller rooms are attractive to renter’s in today’s market. But you don’t have to make this much of a commitment. You could host a foreign student for a short period of time. You could charge commuters to park on your driveway. You could even rent out your garden as an allotment, or your attic space as storage space. And while you’re up in the attic, keep an eye out for vintage clothes. You can often spruce these up and sell them for good money.
If you have a job, ask yourself if you’re earning what you’re worth. You can compare salaries in different roles on the Payscale website. While it’s never easy asking for a pay rise, you have nothing to lose. Ask yourself if there are any extra responsibilities you could take on in return for a pay rise. If you think that might be possible, put together a proposal and pitch it to your boss.
You could also consider learning new skills to increase your value in the job market. You could do this through an Open University course or evening classes. If you’ve been working in a professional field, such as education or business, you might even be able to make money on the side as a freelance consultant, putting your years of experience to good use.
If you have a job and don’t have a pension through your employer, you should grab it, as it’s tax free, and your employer will put a decent chuck of money in for you. If your employer doesn’t offer a scheme, you’re in luck, because recent changes to the law mean that all companies have to offer a pension contribution to their employees by 2016.
Sometime in the next three years, if you’re employed, you’ll be enrolled into a pension unless you opt out. Take advice before you say no because it’s a good deal and you don’t want to lose out!
If you plan on working until the age of 70, any money you make now still has 20 years to grow. For this reason you need to consider your investment options very carefully.
If you don’t have an ISA, you should get one, and if you do, you should aim to use all of your tax free allowance each year.
Louise Oliver, of Taylor Oliver Financial Planners, says you should start off by asking yourself how risk adverse you are. If you want to minimise risk as far as possible, you might be better off sticking to a cash ISA.
If you’re prepared to take on a little more risk, she suggests looking at collective investments. A collective investment is a product which is managed by a stock broker, who invests into different asset classes on behalf of a variety of people, making sure to minimize their tax liability.
Laith Chalef, Pension Investment Manager at Hargreaves Lansdowne, says that the first thing you should do is to build up a cash buffer of around six months’ wages, in a cash ISA. Once you’ve got this, he says you should take a look a Stocks and Shares ISA if you plan to be investing for another 20 years.
We also have a free guide to investment trusts which can also be a good way to invest in the stock market.
Whatever you invest in, you should review the situation at age 60, and consider moving some or all of your money into bonds, savings accounts and other more stable investments. The reason for this is that you don’t want to find that the stock market has crashed by 15% the day before you retire!
If you have your own home and, particularly, if you have no family to leave your wealth to, then equity release may be a good option once you retire. It’s not something you can get until you’re into your 60s but it’s a potential fallback option.
Be careful though!
The industry has improved in recent years but there are still a lot of pitfalls for the unwary. Read our article on equity release and get independent advice before agreeing to anything.
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If you’re unsure if you’re doing the best you can to make your money work for you, it’s often worth seeking the advice of an independent financial adviser (IFA). In the majority of cases, an IFA will save you more than they will charge you for the appointment! They consider your personal circumstances in depth, and suggest ways you might be able to free up spare funds, such a re-negotiating your pension or advising on equity release if you own your own home. You can find an IFA near you at Unbiased.