MoneyMagpie

Sep 08

Retirement savings at any age

Whatever age you are there are simple steps you can take to plan ahead for a rich retirement. You’ll probably have about 20 years of retirement so the earlier you plan ahead, the easier it’ll be to have the lifestyle you want.

In light of the post budget changes to pension rules, the issue of pensions has been brought to everyone’s attention. Think you’re too late, or too early, to invest for your future? Not true. You can set up a rich retirement at any age.

Retirement investing isn’t just about having a pension. Saving for your retirement is about creating a ‘retirement fund’ which should include at least two or three different types of investments like a pension, stock market investments, some cash, maybe property, bonds and even alternative stuff like gold or a collection. Here’s how you can gradually build it up whatever age you’re at.

If you’re in your 20s: Every little helps

Retirement seems aeons away when you’re in your 20s. Anyway, you’ve got enough on your plate with student debts, saving for a retirement savingshome and just getting by day-to-day without thinking of putting money away.

But… do be aware that even small amounts (really – even £20 a month) that you put away into long-term investments will grow into something quite impressive by the time you come to retire. The longer you have your money in pensions and other investments (particularly stock market or property), the greater they’ll grow.

  • If you’re working and your employer offers a company pension (particularly one that they contribute to) GRAB IT! Even if your employer doesn’t offer a pension right now, they soon will thanks to auto-enrolment so make sure you don’t opt-out. This is a good way to start your retirement savings particularly as your boss has to put money in and you get tax back from the government. Find out more about auto-enrolment here.
  • Work at paying off your debts first (don’t sweat it too much with the student debt but do go for the expensive debts like credit cards) then get into serious saving. If you’re having problems eroding that debt, sign up to our free ‘get out of debt’ emails for help every few days.
  • Once you’ve paid off the serious debts, set up a regular standing order from your account into a high-interest savings account that’ll go out before you can spend it. Build up a cash cushion for yourself.
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If you’re in your 30s: Explore your savings options

Pensions aren’t just for pensioners and stock market investments aren’t just for the City boys. Retirement may seem like a long way off but the sooner you do something about it, the easier and cheaper it’ll be to be more comfortable in the future.

When in work…retirement savings

  • If your employer offers a pension scheme, join it! The earlier you save the easier it is – £1 invested in your 30s could be worth 20% more than £1 put aside in your 40s. By saying no to your company’s pension you could be missing out on extra money in contributions from your boss. The minimum percentage that an employer has to contribute is 1%, increasing to 3% over the next few years. This only applies to qualifying earnings between £5, 772 and £41,865. Also, money you put into a pension has a tax advantage so for every 80p you put in you get at least 20p added by the taxman – more details in this factsheet. Don’t ignore free money.
  • Even if your employer doesn’t offer a pension right now, they soon will thanks to auto-enrolment so make sure you don’t opt-out. This is a good way to start your retirement savings particularly as your boss has to put some money in and you get tax back from the government. Find out more about auto-enrolment here.
  • Spread your bets. Put some money into a stocks and shares ISA as well as the pension. You get to control it more and you have better choice about what you put the money into.

Freelance or not in work?

  • Set up a stakeholder pension, even if it’s only a small amount each month – it all adds up.
  • Set up a savings safety net for yourself (you can find out about savings pots you should have here). If you don’t have extra money to set aside for savings, make a bit extra here and there. Check out our ideas in our Make Money section.

Time out to have kids…

  • Although you’d love to put your feet up, retirement is a long way off but don’t forget to safeguard your future. Think about topping up your pension and investments, even if you have less to put aside. Quite right to put your kids first but if you keep your own retirement fund going you won’t be a burden on them when you’ve retired.
  • Don’t forget that if you’re a mum Carer’s Credit means your State Pension will be protected for each year you get Child Benefit (you can find out more about this at GOV.UK).
  • As a parent your National Insurance record will be protected until your youngest child reaches 12 for each year you get Child Benefit. This will happen automatically. Also, if you spend 20 hours or more each week caring for one or more sick or disabled people you can claim Carer’s Credit, which will count towards your pension.

If you’re in your 40s: Take stock

This is the time when you start to worry that you haven’t put enough aside and, anyway, you have a load of other expenses to deal with like your mortgage and the family. Your retirement may seem a long way off but it’s still a good idea to see where you stand and make retirement savingsthe most of what savings you can put away.

  • Work towards paying off your mortgage. This is a very safe and tax-efficient way of investing for your future. See our article on paying off your mortgage in double-quick time for ideas.
  • Check the health of your work pension – if you’ve lost the paperwork, the Pension Tracing Service can put you back in touch with forgotten pensions.
  • Once you’ve paid off your mortgage, get into investing in stock market tracker funds (wrapped in your ISA allowance to stop you paying tax) and start looking at other investments like bonds and gold.
  • Get a State Pension forecast to find out if you’re on track for a full State Pension. You can do this online at GOV.UK or by calling 0845 3000 168
  • Look at your outgoings. Chances are you’ll want to do more of what you enjoy when you retire. Compare your spending with your forecasted State and private pensions to check you’re on track.
  • Still caring for 20 hours a week or more? Don’t forget to claim Carer’s Credit to build up contributions towards your State Pension.
  • If you’ve set up a few investments so far you could get a little more sophisticated and run your own SIPP (Self-Invested Personal Pension). SIPPs are like a ‘pension bag’ that you buy and put into it whatever investments you like (within limits). Essentially you become your own pension fund manager.
  • There’s still time to put money into a company pension. Even if your employer doesn’t offer a pension right now, they soon will thanks to auto-enrolment so make sure you don’t opt-out.

If you’re in your 50s: Get real and maximise your retirement cash

50 is the new 40 and many people don’t feel ready to slow down. Just as well given that our retirement age is being pushed back and retirement savingsback! Now probably feels like the time you will start to think seriously about your retirement options, so make sure you find out all the facts first so you can make the right decision for you.

  • Check what you’ll get from the State Pension. You can do this online at GOV.UK or by calling 0845 3000 168
  • If you worked on and off, you may have gaps in your National Insurance record. Now’s the time to check and think about your options, such as buying voluntary National Insurance contributions.
  • Find out when your State Pension age will be – you may have more time than you think to build up your State Pension. From April 2010 to April 2020, the State Pension age for women is gradually rising to match men’s (65) and then both men’s and women’s State Pension ages will gradually rise to 68 between April 2024 and April 2046 (as it stands now but this is likely to change). You can calculate what age you’ll be eligible to claim your State Pension, and whether that age is about to change, at GOV.UK.
  • Keep putting money into your company pension if you have one. If you haven’t put money in now but your employer is offering one, thanks to auto-enrolment it’s likely that you would be better off staying in. If you really have no other savings then you might be better off opting-out but make sure you get independent advice first. You can’t always depend on benefits. Find out more about auto-enrolment here.
  • Are you caring for an elderly relative or friend for 20 hours a week or more? If so, don’t forget the Carer’s Credit to build up towards your State Pension.
  • If you’re in your 50s it isn’t too late to invest in the stock market. If you’re planning on retiring at, say, 65 or 70 you have a good few years for your pot to grow. Similarly, you could invest in buy-to-let property if that’s something you enjoy. Check out our Investing section for ideas.
  • Boost your retirement savings by earning on the side and getting all the benefits you’re entitled to. See our article on help for 50+ without savings.
  • By this stage you might be interested in diversifying your investments. So why not your own SIPP (Self-Invested Personal Pension)? SIPPs are like a ‘pension bag’ that you buy and put into it whatever investments you like (within limits).

If you’re in your 60s: Think about working on

Baby boomers are at it again – changing the status quo to mix work and time off to their own advantage. Think about your options. If retirement savingsyou don’t have enough set aside for a glamorous retirement there’s nothing to stop you working part-time or even setting up your own business (lots more people are doing it at this age).

It’s a good idea to find out exactly how much State Pension you have built up by getting your own State Pension forecast. It’s easy to do and your forecast will show how many years National Insurance you have and the amount of pension you can expect.

There are real financial benefits to working just a few extra years that you might not know about…

  • Did you know you don’t pay National Insurance when you work past State Pension age, automatically boosting your pay packet?
  • Also, your tax free personal allowance increases after 65 so you pay less tax on what you earn.
  • Putting off claiming your State Pension means you could get a larger weekly amount when you do take it. For example, if you get the full state pension of £113.10 per week, by deferring a year you’ll get an extra £610 a year.
  • Alternatively you can choose to take a cash lump sum with interest instead, as long as you have deferred it for more than a year.
  • As of March 2014 pension rules changed, so make sure you know what you are entitled to.
  • Finally, you can work and claim your State Pension at the same time to boost your income. You can also use your State Pension to keep the same amount of money coming in each month but reduce the hours you work. We’ve got lots of ideas for over-60s to make money here.
  • If you don’t have a full National Insurance record but your husband, wife or female civil partner (male civil partners from April 2015) does, you may be able to claim some State Pension through your partner when you reach State Pension age. You may even be able to do this if your partner continues to work past State Pension age and puts off claiming their State Pension provided they were born after April 1950.
  • If you’re yet to reach State Pension age, you can still claim Carer’s Credit to build up towards your State Pension if you look after a sick or disabled person for more than 20 hours per week.
  • If you’re about to cash in your pension and get an annuity make sure you shop around! There’s a big difference between different annuity rates and it can make a massive difference to your income when you’re retired. Look at the comparison service from the Money Advice Service.

If you’re in your 70s: Get everything you’re entitled to

As we’re all living longer, it’s important to think about how we fund our retirement years. More and more of us (particularly the women) are living to 100+ which is a quite a few more years to fund!retirement savings

  • If you’re strong, hale and hearty, why not carry on making a bit of cash on the side? It gets you out and about, keeps you young and in contact with other people. All the ideas in our money makers for the over 60s piece still work for over 70s.
  • Make sure you find out about benefits – you might find you’re entitled to cash and help with rent and council tax bills that will make a real difference to your quality of life. Go to Turn2us to make sure you’ve got everything you can have.
  • Just because you own your own home or have savings doesn’t mean you can’t get extra pension cash through Pension Credit. In fact, around two thirds of people who get Pension Credit have saved something and nearly half of the families who get it own their own home.  Currently, there are 1.6m women claiming Pension Credit – find out if you could be one too! It’s worth checking to see if you can claim it. It takes one free phone call and you won’t have to fill in a form. Call the Pension Credit hotline on 0800 99 1234.
  • You may be able to make up any gaps in your National Insurance record by paying voluntary contributions.
  • Keep in mind the fact that the over-80 State Pension is even better than the normal State Pension. You can find out about what you can look forward to there at GOV.UK.

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