If you’ve hit 60 and don’t have any retirement savings, then you’re probably worried. The good news is it’s not too late to turn things around. Today I’m going to explain what I’d do in this situation.
Check what you’re entitled to
The first thing to check is what you’re already entitled to. This may be more than you think.
If you’re 60 now, then you’ll qualify for the State Pension on your 66th birthday. The full State Pension is currently £164.35 per week, which will increase by at least 2.5% per year. This may not be enough to live on, but it should certainly help.
The second thing to check is what company or personal pensions you may already have. If you’ve had a long career at one company, this should be easy. But if you’ve moved around a lot, some detective work might be necessary.
This is worth pursuing. After several decades, small pension pots can become valuable. You may also be able to combine these pensions into one larger, lower-cost pension or annuity.
Boost your spare income
You know what you’ve got, and it’s not enough. The next stage is to maximise the amount of spare cash you can save each month.
If your home is bigger than you need, you could consider downsizing to release some of the equity. If you want to stay put, consider finding a lodger or perhaps renting out a room through Airbnb. Under the government’s rent a room scheme, you can earn up to £7,500 per year tax-free from letting out furnished accommodation in your home.
It’s also worth taking a broader view of your lifestyle. If you have two cars, could you manage with one? If you have a leisure vehicle like a motorcycle or caravan, does it really get used enough to justify the cost?
Finally, can you cut back on spending such as holidays and gadgets? At this stage, I’m afraid every little really helps.
Save £250k in 10 years
Saving a quarter of a million quid in 10 years may seem a tall order. But with the help of the stock market it might be easier than you think.
The long-term average annual return from the stock market is about 8%. If we assume a slightly lower rate of 7%, then my sums suggest that investing £1,444 per month for 10 years could give you a £250,000 fund.
Based on the latest best buy annuity rates from Hargreaves Lansdown, this would buy a level single life annuity of about £15,000 per year for a 70-year old.
Of course, these numbers are only estimates. But they should give you an idea of what might be possible.
Where to put your savings?
Minimising your investment costs is essential. With a relatively short timescale, I’d focus on conservative, low-risk investments that should provide a mix of income and growth.
In my view, the best choice is to put your money into a low-cost FTSE 100 tracker fund inside a tax-free stocks and shares ISA. Set up this monthly payment with a standing order, and your investment will be completely automated.
Of course, there are other options. But whatever you choose, the most important thing is to start today.
