How to Plan for Your Retirement

The five step guide

At the age of 25, a retirement plan is of no importance to you, unless you have a foolproof get rich quick plan that actually works. Something along the lines of winning a huge fortune on the lottery would be ideal “one can only dream” you have to actually play the lottery to win it! As much as we would all love an early retirement, in reality most of us have to work until we reach the age of at the least 65.

So how do you secure a financially stable retirement fund? The answer is simple follow the five step guide on “how to plan for your retirement”. Please keep in mind this is just a guide to help you understand and plan retirement.

STEP ONE- Start young,

The best time to start planning for your retirement would be at the age of 25; here`s why? By the time we have reached 25 most of us will have gained a certain maturity in terms of our financial responsibilities, Retirement plans should be a part of these responsibilities. There will be a significant difference in the amount of pension you will receive when you start at a young age, opposed to that if you were to start a decade later. A retirement plan can be set up at any age.

STEP TWO-How much?

Before you can determine how much money you will need to set aside each month, an assessment of what your living expenses might be when you reach your retirement age is essential. The best way to do this would be to devise a budget plan, do not include mortgage payments because you should not have any by the time you reach retirement. Do include the cost of any hobbies you may want to take on or extra holidays of trips.

 To give you a general idea of what should be included in your budget plan, some of the basics have been mentioned for your convenience; starting with the necessities’ the first thing on your budget plan should be the cost of your weekly or monthly food shop. Be sure to include an allowance for eating out if this is something you already do on a regular basis or would like to do when you have retired.

Utility bills need to be added, you may have managed to reduce you power usage over the years so keep in mind they could be a lot less than what you are currently paying. Set aside a budget for other basic items like new clothes or trips to the salon/barbers. Not many of us keep a watch on how much we spend and what we spend our money on and sometimes an assessment of our finances can be somewhat surprising.

After you have budgeted for life’s little essentials, you can then think about what you see yourself doing once retired. Maybe you fancy travelling the world, moving to a nice quiet village in a different country, perhaps you see yourself playing rummy for matchsticks in a cosy little retirement home. Try to set out your budget plan on an annual basis; this will give you a better idea of what you need to save. To sum it up it all depends on how you want to spend your retirement years.

STEP THREE-Pensions and investments.

You may be eligible to claim a state pension, which will pay a set amount of money each week to cover living expenses. You can contact your local government or benefits department for more information about how it all works.  To gain a more comfortable lifestyle it is advised to save or invest some of your hard-earned cash, there are several options to go with.

CPS (Company pension schemes) Are a good and profitable way of investing in your retirement, a percentage of your salary is added to a fund that will invest your money in shares of some sort. Most companies will match your contributions up to 7% annually, you do not need to know much about or get involved with the investing, as a professional will do the work for you.

ISA`S This type of investment is more hands on; it requires a good or basic knowledge of the stock market and keeping a keen eye on the action. You control where your money goes, so you can move it if the market falls. Unfortunately, employers are not inclined to add any contributions to an investment fund of this nature, so it is all up to you.

SIPP`S (Self-invested personal pensions) Are very much similar to ISA`S when it comes to deciding where your money is to be invested. Unlike any other pension, this type of investment allows you much more control over your cash. If you would prefer to invest in a particular company or product only, this is perfect.

PSP (Personal stakeholder pensions) Are more for those who do not have the time or simply are not that concerned with what they have invested in. Professional advisors will do all the work for you; however, they do charge a fee how this fee is paid will depend on the individual advisor.

Savings accounts Are another way of securing money for your retirement as most bank`s or building society`s will pay as small percentage of the amount you have saved annually, usually around 2% (estimation only). You have the peace of mind knowing your money is safe with a savings account; on the down side, you will not have the opportunity to gain a small fortune.

Premium bonds and investment bonds should also be considered, as they can give a small fortune in return.

STEP FOUR-Age and percentages

It is impossible to predict how long we live for, and so it is impossible to predict how much money will be enough to live on once we “hang up our hat” so to speak. So how do we determine how much to put aside? If you calculate, how much you would need to survive on over a 30-year period, it will be a lot easier to figure out how much you should put aside. For example:

If you start saving in your twenty`s and you set a minimum of 10/15 percent without making any cut backs up to retirement, this will give you a very sizeable amount to live a comfortable and healthy retirement. To start in your thirty`s and have the same comfort you would need to set aside between 15/25 percent of your income. To begin in your forty`s you would have to save huge 25/30 percent of your income to gain financial security in retirement.

The reason for the increased percentages the older you are when you start saving for your retirement, this is obvious; however, for those who are not quite sure here is a short explanation. The younger you are the longer you have to save, the older you start the less time you have to save, so to avoid having to make some cutbacks on what you want to spend money on when you do retire the increases are necessary. These percentages are only a guideline to give you an insight of what you should be doing for retirement.

STEP FIVE-Check and relax!

Now you know what you should be doing for your future and your retirement plan is complete. The last and most important steps to take are as follows; before you sign any sort of agreements or contracts be sure that the company you are dealing with is a reputable one as well as a legitimate one. As much as we hate reading the small print, it is highly recommended that you read it thoroughly and completely understand what you are agreeing to.

If for any reason you are not entirely happy or do not fully understand what you are getting involved with please seek help from the advisor or take it along to another expert for a second opinion. After all this is your future in their hands, do not give it away to fraudsters. Once you are happy with your choices and you have signed the on the dotted line the only thing you have to do is sit back and relax, “well not completely” you still have to continue your career and other such life duties.


Company : 1902 Media