Personally, I’ve come to pension planning a little late. Although there’s no particular age that you ‘should’ start a person – in fact, they always say that the best time to start a pension is right now! The longer you save for your retirement, the larger the pot will be when you get there but doing something now is better than doing nothing at all.
That’s what I’ve personally found anyway. It’s been difficult for me to figure out what to do about a pension because I’ve been self-employed for my whole career. This means I’ve never had a pension set up for me by an employer and I’ve never opted out of anything – it was just one of those things I’d get around to one day.
But, that day didn’t come until fairly recently – before now I’ve been more concerned with paying my tax, national insurance and bills rather than saving for my pension. In fact, for some of those years, I’m sure I wouldn’t have had much left over to put into a pension fund anyway!
However, saving something is always better than saving nothing and, now that I’ve started, I’m already thinking about other ways I can boost my pension and possibly get some passive income streams in place before retirement. Here’s what I’ve been researching…
Stocks and shares
According to the educational finance app Female Invest, there’s a huge gender gap in investing. Fewer women invest in stocks and shares compared to men however, the number of women is rising and 67% of women are now making more investments in addition to their pension accounts.
So this is an area that I’d like to learn more about. I’ve discovered that, if you’re willing to make long term investments, it’s likely that you’ll make money overall, even with dips in the stock market – it seems to always recover and grow, even after times of economic difficulty.
Investing in stocks and shares allows you to make a passive income in three ways. Firstly there’s the percentage rate of interest you’ll make on the money you’ve invested. If you keep the interest within the investment account, you then earn interest on the interest you’ve received. This is compound interest and it helps to grow your savings.
Secondly, there’s the dividend that the companies pay to all shareholders each year. If the directors of the business have decided to offer dividends, the company’s profits are split on a ‘per share’ basis – so it may be $1 per share, so you’ll receive this value multiplied by the number of shares you own. You’ll receive this income either annually or quarterly.
Thirdly, if the market price of your share rises, you’ll benefit from this increased value when you sell it – making capital gains. This is what I always imagined the stock market to be about: buy low, sell high. Of course, you can only make this profit once and only when you sell the stock – and deciding when do to this is crucial.
Property Investing
Because I regularly write about homes and interiors in my role as a magazine columnist, I’m so interested in property. Buildings fascinate me and I therefore find the idea of investing in bricks and mortar to be a more appealing prospect.
However, it can be more involved than simply putting your money in a stocks and shares ISA and leaving the pot of money to grow – there’s more paperwork to complete and different levels of involvement, depending on what you’re going to use the property for. But there are certainly some ways you can make money by investing in a building.
For example, you could rent out a property as a holiday home, which involves lots of work and an investment of your time as well as your money, but will make you more money per week than a monthly let. However, it won’t always be fully occupied so you won’t earn anything for some months – BUT you could use it yourself during those unoccupied weeks.
A second option is to get tenants and ensure that you have a monthly income from the rental you charge. This takes some effort to set up but you can use an estate agent to handle the lettings process – from finding tenants to doing all the correspondence. Of course, there are risks involved with both of these options, including damage to your property and non-payment of rental, so the passive income you gain may fluctuate.
Another factor to consider is that property prices rise over the years so, if you’re a long way from retirement, it’s likely that the value of the home you invest in will go up over the decades. This profit can be unlocked when you sell it, which could be at the start of your retirement and can free up some cash to put into an annuity to give you a monthly income for life or other investments.
Side hustles
I’ve always thought it was a good idea to have a side hustle: something you can do to earn a bit of extra cash alongside your main career. It’s a way to find extra money to put into your savings (stocks, shares, property or any other way you wish to invest) or to use when you need to cover unexpected bills etc.
To set up a side hustle, consider your skills, experience and assets. What can you sell? Could you make something? Can you share your knowledge by teaching? I’ve previously shared 15 side hustle ideas so be sure to check that out and discover your hidden means of making extra money on the side.
The important thing to consider here is how you will finance your side hustle. If you’re using up a chunk of money you’ve already saved for retirement, this investment could end up being at risk if you plough it into your business idea and you could end up with nothing.
It’s also not a great idea to finance a start-up using a credit card; even though this option has in-built consumer protection mechanisms like chargeback transaction reversals and purchase protection (which acts as a kind of insurance on items you buy) you’re still better off using a properly budgeted cash flow to get your business off the ground.
That way, you won’t owe anything to a bank or credit company and you also won’t be risking your existing retirement fund. Instead, you can safely spend on your business idea and see if you can create a side hustle that’ll give you a passive income in retirement.
I hope this blog post has helped if you’re planning for your retirement at the moment. What other options have you discovered for investing your money? What are you doing now in order to boost your pension savings? Do you have a passive income stream that will bring you extra cash during your retirement? Please let me know in the comments below.
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This article is a sponsored collaboration. The pink links in the content indicate a sponsored link or information source. The blog post reflects my own experience and the sponsor hasn’t had any control over my content 🙂
