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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 well before retirement.
It might be tempting to think you can’t do enough before you retire. You may feel like now the only option is to wait and rely on pensioner benefits and the State Pension. However, we can never truly rely on the state, because we never know what’ll happen in the future. Luckily, there are things you can do now to make sure your future looks a lot more secure.
First, reconsider the way you view your life and work. If you have no savings at 50, you may have to work until you’re at least 70. This isn’t something many of us like to contemplate, but remember you’re not the only one. Lots of people work for longer these days and it’s not always as bad as it sounds. There are good sides:
You’re 50 with no savings: that often indicates you’re not sure HOW to save well, or that you’re often in the habit of spending what you earn (or more!).
The first step is to work out how much money you actually need to realistically support yourself as you get older. Therefore, it makes sense to establish a goal to aim for. Put together a budget, taking into account heating, electricity, water, council tax, food, transport, home repairs, mortgage repayments or rent, 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, to earn and save, 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. Try the free savings calculator by the Money Advice Service to do the sums 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 an online pension calculator to work out how much you need to put 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 and you have very valuable life experience. So what can you offer? Which skills do you possess that could be monetised?
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 an academic and specialise 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. The best news is you don’t need any formal teaching qualifications either, you just need to be an excellent coach, and possess some qualifications in the subject you want to teach.
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 own your home, why not take a lodger? You can earn up to £7,500 tax-free this way; and even small 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.
Do you have some writing ability? Then consider applying for the various online copywriting jobs that have appeared on the internet in recent years. Websites like Fiverr, Freelancer, and UpWork offer a range of freelance services. If you have the skills people are looking for, then sign up to these sites, advertise yourself and try to attract some regular work. There are people out there who have done the same thing, and in time eventually quit their day jobs to work online full-time.
If you have a job, ask yourself if you’re earning what you’re worth. You can compare salaries in different roles on sites like Glassdoor.
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 they are important to securing financial freedom in later life. The tax rules behind private pensions make 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’re in work and eligible for the workplace pension scheme, this should be your first port of call. Employers have to put in at least 3% of contributions, and you put in a minimum of 8% – though you can choose to put in more. Many employers will match more than 3%, too. The Government tops this up, too: currently, 2% for basic tax payers. That’s free money straight into your pension!
If you’re not in work or not eligible for the workplace pension 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).
Don’t rely on your pension alone if you’re 50 with no savings. 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. 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.
Unfortunately, if you’re already 50, you can’t open a Lifetime ISA. However, if you know someone under 40 who looks like they also won’t have many savings when they get to 50, tell them about it! Anyone aged 18-40 can open one and pay in up to £4,000 each year until they’re 50 years old. They can take the money out when they’re 60 – as one, big, tax-free lump sum – including a 25% Government bonus.
We like index-tracking funds for easy, cheap, stock market investing, so take a look at our explanation of how these work and why it’s best to put them in an ISA so that you don’t pay tax. Its amazing how many people don’t know about this, so get involved before it becomes common knowledge.
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 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 apply for until you’re 55 but it’s a potential fallback option.
There are lots of misconceptions about equity release, but in a nutshell it involves taking out a secured loan against the value of your home. You then pay this back from the sale of your property once you pass away or go into full-time care. The good news is you’ll never borrow more than the home is worth, so you’ll never enter a scenario of negative equity. You can also only ever borrow a maximum of 70% of what the home is worth.
The interest is rather high on equity release loans, but will never exceed the value of the home. Only go with a provider offering a ‘no negative equity guarantee’ to make sure this is the case. (Any provider not offering the guarantee isn’t approved by the trade body – so run away, fast!).
Moving home is also possible, with many lenders offering to port the loan if the customer chooses. If you’ve taken out equity release but have a sudden windfall that resolves your financial concerns then you can actually end the arrangement early too.
Equity release is a controversial topic and it’s certainly not for everyone. Many parents want to leave an inheritance for their loved ones and find the concept offensive. While others view their investments as their money, not their families, and therefore can do with it as they wish. You can protect part of your property to leave an inheritance – it just won’t be as much as if you left the entire property to your children. You also won’t be able to take out as big a loan.
Some may have children who are wealthy and successful in their own right and do not need an inheritance from their parents. In this scenario they may actively encourage their parents to pursue equity release. Especially if the parents are struggling to make ends meet during or before retirement.
Equity release has also been seen as a lifeline for those who still have high interest only mortgages in later life, and need to pay them off and stay in their homes.
The industry has improved in recent years, but there are still a number of issues that need considering by anyone investigating the possibility of equity release. 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.
If you’re lucky, you may have a friend or family member who’s an IFA. Invite them round for dinner and ask if they can help you. They may be more than happy to do it for a good sunday roast!