Financial Milestones: What should you be doing to save for later life?

by Darwin on January 15, 2013

Not many people think about a mortgage, pension or care home fees when they turn 20-years-old. And why should you? You are young, the world is your oyster and life is there for the taking.

Why waste your time worrying about savings and long-term investments when you can live in the moment?

Well sorry to burst your dreamland bubble but you should be concerned. Too many Britons are reaching 40-years-old without any savings put away for their golden years. Life may seem young now but the key to a comfortable retirement is to plan effectively, decades in advance.

In fact, 22% of UK residents aged between 30 and state pension age, are not putting anything aside.

Life expectancy is rising and more and more of us are living well on into our nineties. That means that the aging population now requires more health care and state funding.

How can you make sure you have a relaxing retirement that is rich and full? Read on to find out how.

In your 20’s you should:

  • Open a tax-free ISA
  • Start putting away as much as you can to save
  • Start to wipe away your debts
  • Set up a pension
  • Try to get a mortgage

At this point in your life, you should have your first proper job. This means that you are on a modest wage. Retirement may seem a long way away but you should start to take action now to clear away any bank/credit card debts, and repay your student loan.

If you can, enquire with your work about starting a pension. Setting one up this early will give you a bigger fund when you retire. What is more, many experts are claiming that owning a house and a mortgage has the same value for financial security.

If you can, try to get yourself onto the property ladder.

In your 30’s you should:

  • Assess your outgoings and debts
  • Join your work’s pension scheme ASAP
  • Start to think about long-term investments
  • Retain property

If you haven’t already done so, this decade you must start to explore your retirement options. What is the interest rate of your company’s pension scheme? Do they make contributions on your behalf and if so, how much?

Over the years you have probably attained some debt by getting married, having children or buying your first house. Now is the time to assess your outgoings to start saving for the future, and pay off your debts.

An efficient retirement plan will have finances in control and a budget in place.

By now you should be concentrating on acquiring some property. The chance of being approved a mortgage decreases the older you get, and the length of mortgage-term decreases too.

In your 40’s you should:

  • Keep adding to your tax-free ISA
  • Start saving if you haven’t already done so
  • Dedicate a large amount of your earnings to a pension scheme

It you haven’t started saving or opened a pension scheme, it isn’t too late but you do need to act fast.

By this point, you should have built up some savings in an ISA or pension scheme so if you haven’t, you need to start and contribute a large portion of your finances to it.

You should be on top of your debts and be in a good position to plan financially for your future. Take into account that your wage is probably at its highest now, so take advantage of any bonuses or pay rises.

If you haven’t done anything towards your retirement so far, you need to get serious. What age do you plan on retiring and how will your lifestyle need to change?

In your 50’s you should:

  • Set a retirement date
  • Enquire about a Self-Invested Personal Pension (SIPP)
  • Maximise contributions
  • Assess your pension fund risk

This decade is the most important with regards to retirement planning. You need to really think about when you plan on retiring and calculate the income which you will need.

Are you likely to purchase an annuity when you retire? Fundamentally, this pays a guaranteed income for life but millions of Britons are refusing to buy them because of the disappointing rates on return.

If you do want an annuity, you should start to phase out volatility from your pension fund so there is less risk of a decrease in value. If you have any risky equities, such as the stock market, take them out now and put them into a safe investment.

Many people consider a SIPP at this point to have more control over the way in which their pension fund is invested.  It is a government-approved personal pension scheme and allows individuals to make their own investment decision.  Maximise your contributions so you are putting as much as you can towards your savings pot.

Or buy a lottery ticket and simply hope for the best?

Which milestone are you at? Have you undertaken all or some of the points so far in your journey? Keep on track with the guide and you will have a comfy retirement. If there is anything you are worried about, there are people that can help like The Money Advice Service.

This article was written by Lauren Grice on behalf of Cheselden, the specialists in NHS continuing care claims. Do you have to fund your own care? Speak to the experts today for Cheselden healthcare funding advice.


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