Ever heard of the 10% saving rule? As its name suggests, people that follow this method put 10% of their monthly income into their retirement fund. But as most experts are keen to point out, it’s rarely the best option. This monthly contribution alone often isn’t enough to achieve a comfortable retirement.
If you’re wanting to build a healthy retirement pot, we have suggested a few tips that might be a little more helpful.
The earlier we start saving, the more we’re typically able to put away for the future — this applies to pretty much any financial goal. It’s especially important for pension building, though. Rather than putting aside just 10% of your income each month, you may want to calculate how much you’ll need after retirement. Not sure where to begin with this? Use a pension calculator from an impartial advice source to see if your potential income matches the amount required for your desired post-work lifestyle.
Don’t rely on your pension
Pensions are an excellent idea. As a UK employee, you’ll be entitled to two types: the state pension and your company’s private one. Self-employed Brits can still receive a state pension but are not eligible for the latter. Whichever employment group you belong to, it’s widely advised not to rely too heavily on either your state or private pension. If you adopt this mindset before retirement, you’ll likely feel more inclined to focus on other forms of pension fund. This brings us nicely onto our next point…
Look into ISAs
ISAs can be a useful store for retirement money — in particular, Lifetime ISAs allow you to develop long-term funds. Select this option, and you’ll be able to place up to £4,000 into your account this year; the government will then contribute 25% of this amount into your fund as well. Note that the current standard ISA allowance stands at £20,000 per year. While a Lifetime ISA doesn’t offer a pension equivalent, it’s an effective saving solution and could prove handy for building your retirement fund.
Explore the alternatives
Looking for other ways to add to your retirement pot? How about asking retirees for their advice? Or you could seek help from a financial advisor. For free support, look to useful resources like the Money Advice Service. If you go to the right places, you’re guaranteed helpful advice. It may be that people suggest that you consider financial assistance or offer tips on spreading your pre-retirement income further. Whatever their suggestions, you’re likely to be glad that you asked for guidance.
Reduce your debt
Do you have any outstanding debt? If the answer’s yes, and you haven’t already, it’s time to start reducing it. Though this may sound hard, it doesn’t have to be. For a stress-free way to clear yours, why don’t you take up a side job before you retire? Use all that you earn from your extra hustle into your debt-lowering fund, and you may be surprised at how quickly you’re able to clear all outstanding payments. If you’re a long way off retiring, even better! You’ll have plenty of time to deal with debt. Better still, you could place the rest of your earnings into your post-retirement pot.
While you’ll most likely need to contribute more than 10% of your current income into your retirement fund, this could be easier to do than it sounds. With these tips, you can boost your post-work finances before you even retire.