Have you ever wondered what you can do to improve your retirement income? It may feel far away for some of us and for others it might be fast approaching. Either way, you’ll want to feel secure in your retirement and make sure you have enough money to live on, so how can you add more to your retirement fund right now..?
IN YOUR 20s – INVESTMENTS
Investments in a retirement savings account can help your money to grow at any time of your life but they say that the earlier you start to invest your money, the bigger the pot will be when you get to retirement. And that’s because of compound interest. When your interest earns interest, it grows much more if you start earlier – so a £50 investment at the age of 25 will be worth 3x more than if you saved the same £50 when you’re 45.
This is something I’m looking into as I’ve heard a lot about it from my US counterparts, such as Sarah Nourse and The Financial Diet on YouTube but I’m still a little confused about how it works in the UK. I’m such an investing novice that I feel I’ve got a lot more reading to do before I put my money into this kind of account – so share any info you have in the comments below.
IN YOUR 30s – LIFETIME ISA
I did really well with the Help To Buy ISA when I was saving for my first home, and got a 25% bonus on top of my savings when it was used to buy my house. The Lifetime ISA (LISA) is the same kind of thing – you can save up to £4000 per year and get 25% extra on top. In this account, your savings can only be used to buy your first home, or for your retirement at the age of 60+. If you take out the money at any other time, there’s a penalty to pay and you won’t get the 25% bonus. If you’re planning to save in a LISA for your retirement you have to start your Lifetime ISA before the age of 39 so get started now!
IN YOUR 40s – EMPLOYER PENSIONS
You’ll no doubt have many financial commitments in your 40s, such as a mortgage, children, hire purchase repayments and so on. But that doesn’t mean that saving for your retirement should stop. Make sure you’re benefiting from your company pension scheme and take advantage of any contributions matching your employer would offer.
Also, if you’ve been working and paying national insurance in the UK, check your state pension forecast to see how much pension you’ll be eligible for when you get to retirement age. If you have any gaps in your National Insurance contributions, you can make these up now to make sure your pension is topped up to the maximum allowance when you retire.
IN YOUR 50s – PROPERTY INVESTMENTS
Congratulations, you’ve paid off your mortgage! So what do you do with that extra money each month? Why, buy another property, of course. This option might not be the best for you, especially if you have grown-up kids to help out with their first homes. But if you feel like you could happily spend your money on a second property that you could rent out, this is a good way to get a monthly income in your retirement years. Plus, you have a property that you can always sell in the future if needed.
IN YOUR 60s – REVERSE MORTGAGES
A reverse mortgage is designed for anyone over age 62. It provides a completely different approach to financial security during retirement. A reverse mortgage lets you stay in your home and continue to own it without as much fear of possible eviction, as it’s not possible to miss required payments as none are expected on a particular schedule and you choose when to make payments toward your loan balance.
However, not every aspect of a reverse mortgage is positive and there are some drawbacks of reverse mortgages you need to think carefully about before obtaining one. One such possible drawback is the full remaining balance of your reverse mortgage can be called in if the terms of your loan are violated. But, if you fulfil all the criteria of the loan, the reverse mortgage agreement typically only ends if you leave your home permanently. And if your home is sold, you retain any remaining balance from the sale after your reverse mortgage debt is paid.
I hope this blog post has got you thinking about your future financial plans. It’s always a good idea to start right now, not matter what stage in life you’re at. Let me know how you are planning for your retirement in the comments below, I’d love to get your advice. I’m especially interested to learn more about investment accounts so please let me know your experiences 🙂
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