6 Tips To Save For Retirement
Saving for retirement is a way to safeguard your future and be able to enjoy your free-time doing what you truly love. However, there are many considerations for securing a comfortable financial future. Find out more getting on track to save for retirement, today.
Learn about your country’s retirement options
The majority of countries have a state pension scheme, which you are entitled to upon retirement or close to retirement age. Details vary from country to country – so it is good to look into what options are available to you. Not all systems are created equally, and they often serve a supplement rather than enough money to keep up your lifestyle. Also, the retirement ages vary from country to country, from around age 60 to even up to 70. Even if you aren’t anywhere close to retirement, it is handy to know what the system is where you live.
According to a study by Schroders, a good overview on where money comes from retirement is that “state pension schemes are depended on for 19% of retirement income and company pensions for 18%. Europe is most optimistic about state pension schemes, where people expect these to account for 26% of their income in retirement.”
Work-based pension schemes
In addition to social security and similar programmes, there are also work-based or group personal pension schemes available as well. This is essentially a retirement savings plan with defined contribution that is through your employer. Some benefits include tax deferment or reduced tax liability. Because it is managed by your employer, you do not have to worry about the details. Still, read the fine print initially and know what you are signing up for.
As the money is withdrawn, it may be subject to taxation depending on the programme you have chosen. Also, remember that this money is meant for retirement and drawing early on the funds can be unwise in terms of penalties and practicalities. Here also, knowledge is power. Ask your employer more if there is a work-based pension scheme in place.
Planning for retirement by age
How old are you? Sometimes that is a rude question. Yet, when making plans about how to save for retirement it is an important question. It is key to remember that the more years that you spend saving, the more savings you can accrue over time.
Very few people in their youth are thinking of how they will support themselves when they are in their 70s. Starting early gives you more time to save for your future and experts say that you should already be saving up 10-15% of your gross income yearly, already when you are in your 20s. By your 30s, that amount grows to at least 15%.
What if thinking about retirement was not even close to your mind until now? Whatever your age, make this the right time to start – and benefit from your choice later. An ideal plan is to aim to live off 80% of your salary. That means, after taking into account any state or employer funds, how much money are you working with?
It is quite likely that you still need to have a good amount of your own savings or investments to be truly financially secure. Remember the timeline after retirement, if all goes well, you may need money to live off for decades.
Personal savings and investments
Having personal savings is a smart idea for anyone, for example when having a rainy-day fund . For retirement, you can also open a bank account dedicated to retirement. Choose a suitable savings account so you can get the benefits of money gathering interest over time. Remember – this is for your retirement. Resist the urge to consider this accessible money or you risk dipping into it whenever you need a financial boost.
Investing your money brings more benefits because you have the possibility of earning more money than you added in the first place. There are many companies dedicated to investments with multiple options of how your money is used and what are the risks vs. benefits for you. Consult the experts if you are unsure about a good way to invest. Even having a paid financial consultant is a small investment for a more secure and comfortable financial retirement.
Prioritise retirement saving today
There are times where you should focus on the “here and now” and pay off those bills first. For example, if you have an emergency debt situation or unexpected life expenses. However, some of saving for retirement is a matter of mentality – is it important?
The answer is yes, if you want to ensure that your retirement finances are healthy. Maybe you are not in a position to send 15% of your gross salary to retirement savings. However, that doesn’t mean you shouldn’t prioritise this important investment. Consider the perspective that saving for retirement is as important as your other expenses. How much can you spare?
Take a close look at your finances, where can you save money ? Due for a raise? You could allocate that extra money to your retirement savings fund, for example, without impacting your current lifestyle. Make the calculations today and get on track with your retirement savings.
Early retirement: Can you do it?
Studies have shown that many people opt to retire a few years earlier than their originally predicted age. In the extreme cases, it might be tempting to read stories about people that have retired by 40 and feel pressure if you are not in the same situation. Like most amazing success stories, many of these individuals have special circumstances or access to large amounts of money. Not only that, there might also be some luck involved – such as with successful risky investments.
Take heart that one thing that these people share is good financial planning and saving for retirement. Learn from the best of those stories and make positive steps now for your future – whether you retire at age 50 or 75.