Saving for Retirement: 5 Simple Tips
“You can be young without money, but you can’t be old without it.” – Tennessee Williams
When you’re in your teens, twenties or thirties, saving for retirement seems like an alien concept. You’ve got bills and expenses and a life to live now. Let the “future you” worry about the future, right?
Well, like everything else in life, retirement has a habit of sneaking up on you, and it pays (quite literally) to be prepared.
That’s why it’s never too early to start thinking about the best way to save for retirement. Here are a few simple tips to help you do just that. 👇
How Much Should I Save for Retirement?
A good rule of thumb is between 10 and 15 percent of your yearly income.
If you can afford to save more, great! And if you can’t spare that much, save what you can — every penny counts.
Of course, everyone’s circumstances are different, so consider using a pension calculator to arrive at a figure that fits with your income level and retirement lifestyle expectations.
When Should I Start Saving?
As soon as possible.
Starting in your early 20s gives you a leg up on many of your peers who won’t be thinking that far ahead. But the truth is, it’s never too late to start saving — it’s just more challenging the later you leave it.
For instance, starting at 30 or 40 will mean sacrificing more of your income to play catch up, but with discipline and perseverance, it is doable.
How to Save for Retirement?
When it comes to saving for retirement, there are two clear options:
- Pensions: Pensions are effective as you typically can’t access the money until you reach at least 55, so this gives your pot time to earn interest and mature.
You can open a private pension and set up a Direct Debit to pay in monthly if you choose, while many workplaces also offer pension schemes. In the UK, you’re automatically enrolled into a pension once you turn 22 and earn over £10,000 p.a.
- Individual Savings Accounts (ISA): An ISA lets you save tax-free into cash or investment accounts. Depending on the ISA product, you may be able to access the money at any time, making them far more flexible than pensions for short-to-medium-term savings.
5 Tips for Making Your Retirement Savings Go Further
If you want to help your retirement investments grow, here’s what you need to do:
- Start Now: The sooner you start putting money aside, the more time you’ve got for your investment to grow.
- Make and Stick to a Budget: Use our Budget Planner to help you streamline your costs and identify savings. The more money you save, the more you can divert into your pension and savings accounts.
- Eliminate Your Debt: Aim to clear your debt as soon as possible to free up more money for your retirement pot.
- Make Your Pensions a Priority: To effectively save for retirement, you need to make it a long-term priority. Choose to pay money into your pension ahead of splurging on the things you want but don’t necessarily need.
- Have a Clear Picture in Your Mind: If you know what you want retirement to look like (lifestyle, living situation, car, holidays, etc.) and you have a goal, it could be easier to stay motivated.
We hope this article has helped kickstart your retirement savings plan. Want to learn more about savings and budgeting? Check out these articles:
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