The following is a guest post;
It is never too early or too late to start planning for retirement. Whether it’s a long way off, or just a few years in the future, preparation is undeniably important. As many employers are offering contribution plans instead of pensions, for many people retirement is now their own responsibility. If you are unsure where to start then read through our guide to help you understand the important factors when planning for retirement.
Are you in your 20’s or 30’s
For many younger people, retirement planning is in the back of their mind, but starting retirement savings during these years can help you produce big results when you retire. This is because time, not money, is your greatest asset when it comes to pensions and retirement. If you pay small amounts into your retirement fund for 30 years, then you have plenty of time to grow your savings into a large amount.
Get into the habit of saving small amounts regularly. Set up savings goals for each month and have that amount directly deposited into your savings account. Experts recommend that you aim to save between 8-10% of your monthly income. Do this as soon as you have been paid and then you can budget for all other expenses in that month.
Participate in your employer’s Contribution Plan
Contributions are tax free, so matching funds from employers can increase the power of your contributions. However, it is crucial make sure you contribute enough to qualify for the complete matching amount. If you are under 40 years old, consider taking a more aggressive strategy towards growth when choosing investment options, as you have more years to recover from any possible market down turns.
Set up an Individual Retirement Account (IRA)
If you do not have access to an employer’s contribution plan, then consider setting up an IRA for yourself at the credit union; depositing as much as you possibly can and contributing to this as often as possible. For example when you receive large bonuses or financial gifts from relatives.
Where is your money going?
One of the most important aspects of financial planning is tracking what you spend your money on. It is amazing how purchasing cheaper brands of items, or cutting out your regular restaurant visits can make a big difference in the long run.
There is an increasing variety of tools available to help with your financial planning. Lloyds TSB and MoneyVista offer a free online money manager service as part of their online banking, which allows you to track where your money is going, and areas where you could be saving more. Another option in the early stages of retirement planning is the use of a savings calculator. This will help you to estimate how much your savings could be worth in a specific time period; helping you to determine how much money you need to put away each month.
While it may be tempting, it is very important that you don’t touch your retirement savings. Taking out money from your accounts not only reduces your savings and interest, but you may also lose tax benefits and have to pay withdrawal penalties.