Don’t leave retirement planning too late

No matter what stage of your working life you’ve reached, it’s never too late to start planning for your retirement. However, the later you leave it, the more you’ll need to invest in order to have the funds you need to enjoy retirement and do all the things you want to. In fact, it’s been calculated that for every ten years you delay investing in a pension or other form of retirement planning, you’ll need to invest twice as much to gain the same benefit.

When should I start investing?

As experienced Financial Advisers, our short answer would always be to start as soon as possible.

We understand that there are always other demands on your income at different stages of your life – you might be saving up to buy your first home, starting a family or launching a business. But there are some circumstances when you might be able to start investing in your future without affecting your current income.

For example, if you receive a pay rise, you could think about putting the additional money into a pension. If you’ve been living comfortably on your previous income, you’re unlikely to miss it and you can reap the benefits in the future. Alternatively, you may have some money sitting in a bank account and not gaining any interest, or you might be able to shop around for a new mortgage and transfer the savings into a pension.

Any funds you can use that won’t affect your standard of living will start working for you immediately – and pensions are tax-free, so any money you invest in them will reduce your short-term tax liabilities. You can also look at different options to benefit your loved ones, as well as yourself – for instance, if you invest in a children’s pension.

What if retirement’s just around the corner?

If you’ve had a very busy and successful life and haven’t had the time to think about your financial future, we can still help you to plan for your retirement. However, the later you leave it, the more expensive it will be to achieve the retirement lifestyle you’d like. For instance, if you’d like to enjoy a UK holiday every year of your retirement, taking the average UK life expectancy into account, you’d need around £200,000.

If you’re already into your late 40s or 50s, it may seem like you’ve missed the boat. However, we can still look at ways to help you. We’ll sit down with you to understand your ambitions and assess your financial circumstances, so we can develop a plan that allows you to enjoy retirement. One of the most effective ways of doing this might be to look at compounding – reinvesting income to generate more income – as this can help to generate substantial funds quickly.

To give you an idea of the effect of compounding, our calculation example below will demonstrate the comparison:

• Start at £1,000 growing with a simple interest of 4% p.a. over 20 years.  Result is £1,800.
• Start at £1,000 growing with a compounding interest of 4% p.a. over 20 years.  Result is £2,191. 
• How much do you need to save from age 50 to retire at age 65 with £100,000 when growth is 4%? The answer is £4,802 p.a.
• How much do you need to save from age 30 to retire at age 65 with £100,000 when growth is 4%? The answer is £1,306 p.a.

However, we can’t stress enough how important it is to ask us for advice at the earliest opportunity. If you leave it too late, there may be no viable options available, unless you start looking at areas such as equity release, which is something we would never recommend for our clients.

Talk to us now

The earlier you start to think about life financial planning, the easier it will be for you to afford to invest and the more benefits you’ll gain from it when you decide to retire. With the right advice and guidance, you may even be able to think about retiring early.

The key is giving yourself the time to plan what you’d like your retirement to look like, what you’ll need in order to afford it and how you can accumulate those benefits so you can achieve it. With our approach to lifelong financial planning, we can support and guide you every step of the way. Contact us to find out more about our services and how we can help you take control of your financial future.