19 April 2022

Top Tips for Planning Your Retirement

When it comes to saving for retirement, it’s never too early to start putting aside a manageable monthly sum. Even if you’re in your twenties and your pension years are decades away, clear and consistent retirement planning is integral to ensuring that you have enough saved up to live a comfortable lifestyle.

Saving for retirement through pensions

One of your income streams when you retire will be your State Pension and you can calculate the date you’ll start receiving this here. However, whilst the State Pension should cover outgoings such as your council tax and energy bills, it won’t allow for more expensive items such as holidays abroad and any particular luxuries that you enjoy. That’s why having at least one additional pension is very important, as it means that you’ll have a pot of money saved up for when it’s time to leave the world of work.
There are different types of pensions available, including workplace pensions which will also be added to by your employer, personal pensions that come with a variety of investment opportunities, and self-invested personal pensions (SIPPs), which offer even greater control over exactly where your money is being invested.

Saving for retirement through ISAs

Another excellent savings option is ISAs, as these are a great way to build up your nest egg over the years. Cash ISAs are a popular choice because they come with a tax-free allowance of £20,000 a year, so you won’t pay any tax on the interest you accrue within that threshold. Then there’s stocks and shares ISAs, which come with an element of risk but can potentially deliver strong returns.

Additionally, if you’re aged between 18 and 40, it’s also a good idea to take out a lifetime ISA. With this you can add a maximum of £4,000 a year until you turn 50, plus the government will add 25% each year for free. As an example, if you were to put £1,000 into your lifetime ISA every year for twenty years, in total the government would top it up by £5,000, giving you a sum of £25,000 plus any interest that’s built up. The main thing to consider is that you can’t withdraw money from a lifetime ISA until you’re 60 unless you’re happy to pay a 25% penalty, the only exceptions being if it’s to buy your first home or you’re terminally ill with less than 12 months to live.

Retirement planning tips

As well as investing wisely and saving up for retirement as early as possible, here are a few extra recommendations:

  • Consider how long you may live: People are living longer than ever before, which means that their pensions and savings have to last for longer too.
  • Try to visualise your retirement lifestyle: If you anticipate spending your retirement treating yourself to nice restaurants, going on regular holidays and spoiling the grandkids, you’ll need to save up more than people who live quieter, simpler lives.
  • Factor in Capital Gains Tax: The profit earned on certain assets is subject to CGT, which can significantly reduce your end sum.
  • Consider life insurance: A life insurance policy can help you to make sure your loved ones have enough money to live comfortably after you die.
  • Estate planning is crucial: In order for all of your property, assets and wider estate to go directly to your next of kind when you pass away, comprehensive estate planning should be a priority.

Start planning your retirement

LegacyScore provides a wide range of digital tools that help you to understand your debt-to-equity ratio, choose the right kinds of financial products, plan your estate and leave a healthy legacy for your loved ones. To get started, sign up for your free LegacyScore account today.

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