If you reach 50 with no savings, it’s natural to feel anxious about the future. But don’t worry, you still have time to make money, save and invest before retirement.
It might be tempting to think you can’t do enough before you retire. You might want to give up and rely on pensioner benefits and the state pension. However, you can’t rely on the state, because you never know what will happen in the future. Now is the time to grasp the nettle, and make and save your own money.
- Take a reality check
- Set a savings goal
- Go on a money-making drive
- Consider pensions
- Invest wisely
- Consider equity release
- Have regular check-ups
First, 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:
- It 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 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 first step is to work out how much money you’ll actually need in your old age, so you have a savings goal to aim for. Put together a budget, taking into account heating, electricity, water, council tax, food, transport, home repairs, clothing, holidays and gifts. Check out our guide on putting together a budget.
Once you’ve worked out how much money you’ll need each year, multiply this by the number of years you expect to be retired. Don’t forget, you can expect to live far longer than your parents, so it’s safer to assume you’ll die at 100 than at 80. You’ll also need to factor in inflation. This kind of calculation is tough to do yourself, so track down an online calculator to do the hard work for you.
Consider the cost of care in your later years too, should you become unable to take care of yourself in your own home. 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.
Don’t panic if this seems like an enormous sum of cash: there are plenty of steps to help you hit your goals.
You need to think about ways to make more money right now. You have the strength, the skills and the resources to make money for yourself: 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! Did you know, for example, that over-50s are the best at setting up successful businesses?
We have lots of tips and ideas for making extra cash in our Make Money section. Why not start off with the easy and immediate cash-makers in our article 10 Easy Ways to Make Quick Cash? And, for an easy way to make money from the comfort of your sofa, read our article on online surveys.
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.
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 £7,500 tax free this way (in 2017/18), and even smaller rooms are attractive to renters in today’s market. If you don’t want to commit to a full time house guest, 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.
Pensions haven’t always had the best press, but don’t be put off. The tax treatment of pensions makes them one of the best ways to save for retirement. Any money you pay into your pension after income tax will have that tax added back by the government. It means an automatic top up of at least 20% before you start. It is also allowed to grow tax-efficiently, and you can take out 25% of the fund tax-free when you retire.
If you have a job and your employer offers a pension scheme (which they’ll soon be legally obliged to do), this should be your first port of call. Check out what’s on offer, because often, in addition to the contributions they have to make by law, some will put a decent chunk of money into the pension. Sometimes they will match at least part of your contributions. If your employer has a generous scheme, you should be making the most of it.
If your employer doesn’t currently offer a pension, or you have concerns about the scheme, you can get yourself a low cost stakeholder pension. Alternatively, if you want more control over your investments (and more options), you can consider a self invested personal pension (SiPP).
It’s also worth considering setting up investments outside of the pension scheme – especially if you hit the annual limits.
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. If you plan on working until the age of 70, your investments have 20 years to grow. For this reason, you need to consider your investment options very carefully. Most people should at least consider a stocks and shares ISA, which can be wrapped around all sorts of investments. It’s worth starting by considering collective investments, like funds. These are managed by experts, so you’re picking an overall fund rather than individual stocks and shares.
Whatever you invest in, you should review your investments regularly. It’s particularly vital as you approach the time when you need to access at least some of your money. You should consider gradually moving into bonds, savings accounts and other more stable investments. Don’t do this too soon, however. At the age of 70, you may still have 20 years or more until you’re accessing the last of your investments, so cash may not be the best place for all of your money.
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.
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. VouchedFor is a good place to go to find a financial adviser.