How to balance your current spending with retirement planning
Saving for retirement is one of the most important things you need to do but you need to find a balance between saving for the future and enjoying the present.
In the early stages of working life, retirement and the need to save for it - can seem so far in the distance that it can be difficult to seriously consider how to prepare. As the years go by, salaries (hopefully) increase and calling time on a career becomes more likely, a significant question emerges: how much income do you need to set aside in the present to ensure you can enjoy a comfortable retirement in the future?
The temptation for many is just to keep leveraging their way up the property ladder, throw as much as possible at their company or private pension, and hope for the best. While that is a decent strategy to ensure you will have a pot to draw from when you retire, the temptation can be just to keep blindly saving without knowing whether it is safe to live a little.
So, where does that leave us now in the long run-up to retirement?
Isn’t it just as important to enjoy the present as it will be to enjoy the fruits of your hard-earned labour in the future?
‘Starting point should be the end’
A director of Brian Mole IFA Limited, says the key to finding the right balance during your working life is to plan ahead. “There isn’t a set of rules because everyone is different, but the starting point should always be the end,”
“You need to ask yourself what will retirement look like? What will you be doing? How much it will cost, and crucially, how does that relate to your income and expenditure now? ”
Work out how much income you need
Sitting down and working out exactly how much income you think you will need in retirement is vital. Adding lump sums may be easier and inheritance may also come into play later in life.
But once you know how much you need to save every month and you have got a figure you can stick to; you can then enjoy what is leftover.
“If you know that you’ve got peace of mind that you’re looking after the future, then you can enjoy the present”. And it is not just about piling money into property and pension pots either.
What investment strategies are available?
Holding a portfolio of investments may be the best long-term strategy.
Pensions are good in that you get tax relief. But they do restrict when you can access your money. Individual Savings Accounts (ISAS) are good, particularly investment ISAS that can deliver better returns over the long term. Bonds, rental income, and cash investments are also important.
Where is your pension invested?
On top of all that, it is vital to keep track of where your pension pot is being invested.
At Brian Mole IFA we recommend reviewing where your money is held as often as you upgrade your mobile phone. Lots of people do not know where they are money is being invested. If you haven’t reviewed your pension as recently as you updated your mobile, then maybe you need to look at your pension.
You need to nurture your pension savings and making sure they are kept up to date with regulation, legislation, and your personal circumstances.
As it is often the case, planning is the secret to guilt-free spending during your career, but what if you are coming to the end of your career and you think you have saved too much?
If you have got an ISA or property you can cash in on those before retirement, and you can take up to 25% of any pension pot as a lump sum tax-free.
At Brian Mole IFA we will discuss in detail your retirement planning to help and guide you through your working life and then, most importantly into retirement. Professional, independent advice is always recommended to keep you focused and on track for a financially secure and content retirement.
At present we are offering a whole range of ways to talk to one of our experience independent financial advisers. Feel free to give us a call and arrange a telephone, email, or online conversation to allow us to help you with your pension and retirement planning.