The first 5 steps for pension and retirement planning.
1. Be financially independent
Your ‘personal’ pension is ‘personal’ for a reason. Start to take an interest in your own savings and pension for the future. As you start to expand your knowledge of the different saving streams which can be used towards your retirement your confidence will grow. Professional advice will help guide you down the right path for financial independence, and we would hope this will enable you to understand the requirements to maximise your retirement pot.
2. Start saving now
It’s never too early to start saving for your retirement; it doesn’t matter how much you can afford to contribute towards your pension as every little bit helps. The Annual Allowance for pension contributions is £40,000 per year therefore anyone that hasn’t had their Annual Allowance tapered can make the maximum contribution, although certain rules apply. The £40,000 per year includes any contributions towards your company pension; if you can afford to put the maximum amount in to your pension it may be worth opening a personal pension.
3. Budget and plan for retirement
Calculating the amount you will need each year to maintain your standard of living is the first key part. You may want to determine the amount you currently spend on both essentials and luxuries and how these will be affected upon retirement. You are best dividing your expenditure into two categories, ‘essential’ and ‘if possible’, which may give you a clear understanding of whether your current pension pot will cover the essential costs during retirement. Should your pension pot not cover your essential costs you might chose to, wherever possible, cut down on your current spending in order to be able to enjoy the retirement you desire.
4. Determine goals and risk profile
Once you have determined how much money you think you may need you need to be thinking about the level of investment (and the necessary returns) that may be needed to achieve this. Creating an investment goal and a suitable risk profile is the starting point. Key questions may be: how much growth do you need? How long do you have before you reach your selected retirement age? How much risk can you afford to take? This is the point where professional advice may be best sought after.
5. Invest intelligently
Once you have begun saving having determined your goals for retirement keep a keen eye on what is going on. Ensure that your risk profile remains relevant to your personal situation and circumstances and ensure that your goals remain relevant and realistic.