If you’re over 50 like me and trying to ignore your inadequate provision for your finances in retirement, join the club!
But don’t despair, because it’s not too late to set yourself on the fast track to improving the situation in pursuit of a happy financial retirement.
Don’t beat yourself up about where you are now with your retirement savings. I ‘get’ it. Life is for living. And when you live life properly, it comes at a price. We want the best for our spouses/children/grandchildren/elderly parents, whether that means splashing out on university fees, holidays, cars or even retirement homes.
Believe me, it’s not unusual to arrive at your 50s only to find yourself bereft of meaningful savings for retirement. But here’s what you can do right away:
Figure out a way to save regularly
In many ways, the principles for building funds for retirement are standard, whatever age you happen to be. The first thing you’ve got to do is make a commitment to start saving regular amounts of money each month. I’d make sure it’s the first thing that comes out my current account when the wages hit.
But it’s easy to drift into the mindset of thinking it’s all too late when we are over 50. That’s not true though. It’s never too late to start. The sooner you start, the sooner you can begin compounding your retirement pot.
Yet, if you are used to spending every penny the minute you earn it, you’ve got to examine your lifestyle and identify what you can cut out. Do you really need two cars, or that Sky Sports subscription, or three holidays each year? You are going to have to tighten things up a bit. But it’s worth it. The prize is financial comfort in retirement. So save as much as you can each month and make those savings sacrosanct — saving is an expense that must not be skipped.
Invest tax-efficiently
Don’t bung your savings in a cash ISA or other type of cash savings account because interest rates can be derisory and the spending power of your savings will be unlikely to keep up with inflation.
Instead, I’d go for shares or share-backed investments such as equity funds or pension schemes. Over the long haul, shares have out-performed all other major classes of assets such as property, bonds and cash savings. Getting into shares is getting onto the fast track to a meaningful pension pot, in my opinion.
Look for a tax-efficient vehicle in which to invest, such as a workplace pension scheme, a personal pension scheme, a Self-Invested Personal Pension or a Stocks & Shares ISA. Then make sure the underlying investments within the wrapper are share-based, such as managed equity funds, index tracker funds or carefully selected individual shares of good quality, dividend-paying companies.
Compound
Once you’ve identified a decent share-based investment strategy, the ‘secret’ to multiplying wealth is to compound your investment. You can do that by recycling dividends and capital back into your investments. Some funds, such as low-cost index trackers, can do that automatically for you if you select the ‘accumulation’ version of the fund rather than the ‘income’ version. Don’t delay. Get this project rolling, and good luck!
