How To Boost Your Retirement Fund
Retirement Is Far More Comfortable For Those Who Plan Ahead. Here’s How To Start Right Now
Before you realise it, you’ll be approaching retirement. The sooner you start planning, the better off you’ll be when the time comes.
You may be a long way from retirement, or it may not be far off. Whatever your situation, it’s never too early to start making plans for your life after the workplace. Take inspiration from the following ideas, and improve your chances of a good standard of living after you hang up your work boots (or the equivalent) for the last time.
The sooner you start contributing into a pension fund, the greater the return you’ll see. The benefits from starting early are startling. If you save for 10 years from the age of 21 and then stop, you’ll have a bigger pension than someone who starts at 30 and saves for 40 years until they reach 70. It’s all because of the phenomenon of compound interest. This is shocking when you first learn about it, counterintuitive to most people, but an indisputable mathematical fact. So make it work in your favour and start boosting your pension prospects straight away.
Join Your Workplace Scheme
All employers must offer their staff a company pension scheme, and since the employer has to make a contribution as well, this is a very effective way of building up your pension pot. Salary sacrifice schemes, in which the pension contribution is deducted by the employer before tax, are particularly efficient, since you don’t pay income tax on the amount deducted. In the UK, auto enrolment is being introduced that aims to put all staff on a workplace pension scheme.
Pay In More
Even if you are closer to retirement, you can top up your pension pot by paying in more, either into an existing scheme, or by setting up a new one. However, be aware of high-growth investments in the run-up to retirement. These may seem like a good idea, but they’re usually riskier, and if they fall in value there may not be time for them to recover before you retire.
The later you retire, the more you’ll manage to pay in to your pension fund, and the more you’ll get out of it. The desirability of deferred retirement clearly depends on your individual circumstances, but it’s something to consider. If you’re in good health and still derive some enjoyment from your job, it may be the best option.
Maximise Your State Pension
The UK State Pension may not be sufficient to fund a really comfortable lifestyle, but it’s nonetheless worth making sure you qualify for the maximum amount. If you’ve completed fewer than 35 years of National Insurance contributions, you will not be entitled to the full amount. You should check to see if you have missing contributions, or if you can make additional voluntary contributions to top up your entitlement. You can get more information and a pension statement from the state pension section of the UK government website.
Depending on your skills, qualifications and interests, working part-time after retirement can be an attractive option for many people. You may be able to work in your original profession or in a related field without the stress, hassle or responsibility of a full-time job. This is quite a common choice in some fields, such as healthcare.
Alternatively, retirement, along with the security of a pension, may give you the opportunity to embark on a second career, perhaps related to a long-standing interest or hobby.
Rent Out A Property
You might be fortunate on retirement to live in a property that is rather larger than you require, especially if your children have moved out. If your home is the right size, you might consider renting it out, either to a lodger or as a holiday let. This is an even more attractive option if you already own, or can easily afford to buy, a second property.
Barry Williamson from Panfield House (a self catered apartment in Essex) explains: “The internet makes it easy to find guests (AirBNB has cornered the market in recent years), and many people prefer the more personal experience of renting in this way to the anonymity of staying in a conventional hotel. This is something that we can offer, and being in full control means we can quickly adapt to changes while traditional hotels are left behind.”
Many people find that renting out a property is an enjoyable and profitable way to augment their retirement income. It can even replace the social aspect of being in the workplace, which is one thing retirees tend to miss.
Whether it’s a long time away or fast approaching, it’s worth taking time right now to plan for a comfortable retirement. As we’ve outlined above, there are many steps you can take to bolster your retirement fund, but they all take some planning. With this firmly in mind, there’s surely no better time to start than the present.