The right time to start planning for retirement is when you start working. You have your college years behind you and are now able to work full-time, earning money for yourself. It’s time to start saving! Of course, there will be a state provided pension for you in your retirement years, depending on the work you have done over your working life. But that would never be enough for a comfortable retirement. To supplement this pension, you need to save and invest in other schemes as well.
Private pension option
Your first choice should be a private pension. These can be arranged by your employer and both of you pay into it equally. If your employer does not offer such facilities, you can also opt for a personal pension scheme in which you would have to put in money. This would ensure that on retirement, you would receive extra money in addition to your state pension. The best thing is that you can yourself decide how much you want to invest in such schemes.
Mutual funds
Invest in mutual funds with any extra money you have. These are slightly risky but usually pay off well in the long term. If you are looking for a low-risk fund option, choose gilts like government bonds. If you feel you can take a bigger risk, you can go in for equity funds, which give a higher return on investment. This corpus would gradually build up over the years.
Invest in property
You might also want to invest in your own property if you are earning enough. Not only will this ensure a comfortable roof over your head in your declining years, its value would definitely appreciate over the years. You can always convert the property into disposable income by selling it off and purchasing a smaller property or one in a less expensive area.
ISA options
You can also put your money in Individual Savings Accounts (ISA), on which you will save on tax every year and earn interest as well. There are four types of ISA including cash ISA, stocks and shares ISA, lifetime ISA, and innovative finance ISA. By splitting your investments among these four accounts, you can easily diversify your holdings. Parents can also set up a Junior ISA at thechildrensisa.com to put money aside for their children’s future.
Robo advisors
Financial advisors are something we’d all like to have, but they come at a substantial price. Robo-advisors are the new black, guys. They offer a variety of services that enable you to invest in different formats and to varying degrees of risk. Robo advisors like Moneyfarm offer you the opportunity to invest in a private pension scheme, ISA scheme and more. But remember, investing always comes at a risk, and the risk is much higher than the other options mentioned.
Government-backed schemes
Another option is to put in your savings in the National Savings & Investments scheme. It is a fully secure scheme backed by the government, and some of the accounts are tax free. Saving in the NSI also makes you eligible for jackpots every month. The index-linked savings certificate scheme offered under the NSI also offers opportunities for savings with an eye on inflation, making it ideal as a retirement investment option.
By considering one or all of the above options, you can ensure a comfortable nest egg for your retirement years. Be careful not to sink in all your money in one investment, and try to diversify your portfolio as much as possible in order to keep risks to a minimum. The sooner you start saving for your retirement, the more fun your later years would be.
