How to save and invest for retirement without the pain!

Building an investment pot to finance a comfortable retirement could be easier than you think.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If you’ve never really been a saver, the prospect of building a pot of money to fund your retirement may seem daunting.

So start small. Could you save £1? Most people would answer that question with “yes.” And if you can save £1, why not £1 a day?

If you can do that, you’re off to a good start because you’ll be saving £7 per week, or just over £30 each month. And that’s how it begins – commit to that and you’ll have started a saving habit, which is a decent first step towards building a pot of money for retirement.

Little tweaks mean a lot

The next step is to think about ways you can increase your monthly savings. And I know there will be many demands on your income because the costs of living can be high. But if you examine your lifestyle and spending habits, you’ll probably identify some areas where you can reduce spending and channel the money to your savings.

What can you change? Are you spending too much on barista-style coffee (like me), or on pre-prepared lunches such as sandwiches and takeaways? What’s your monthly bill on smokes, vapes and alcoholic tipples? Have you got a super-duper phone contract or top-of-the-range Sky subscription? Are you getting the best deals on your gas, electric, insurance and monthly outgoings?

I’m not suggesting you give everything up, but small tweaks, savings and downgrades can add up to big monthly savings, which could fuel your savings and you likely won’t notice much difference or feel any ‘pain’. And if you can get your monthly savings up to £100 per month, you’ll be making real progress.

The magic ingredient

The next step is to make the money you’re saving work hard for you. Small increases in the interest rate or return that you earn on your money can make big differences to how fast the money grows because of compounding. And the process of compounding is the ‘magic’ ingredient that will propel you to a decent-sized retirement pot over time.

Putting your money into the highest interest rate cash accounts you can find is a good way to start off on the road to compounding your money. However, over the long haul, the returns from shares have outperformed all other major asset classes. So, I’d put my monthly savings in shares and share-backed investments on the stock market.

It doesn’t need to be a difficult process. Providers such as Hargreaves Lansdown can provide you with a tax-efficient investment wrapper such as a Self-Invested Personal pension or a Stocks and Shares ISA. And it’s easy to select investments to put in them from its website.

You could go for individual shares if you’ve got the time and inclination to do your own research and portfolio management. But it’s perfectly possible to get a decent investment outcome by investing in managed funds or low-cost index tracker funds too. In many cases, you can make low-cost regular monthly investments by standing order as well, which makes the mechanics of regular investing simple.

It’s well worth having a scoot around the websites of Hargreaves Lansdown and other providers for ideas. Good luck on your investing journey!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Retirement Articles

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

1 dividend-growth stock I’d tuck away in my SIPP without hesitation

This income growth stock increased its dividend by over 700% in the last decade! Is it worth adding more shares…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Here’s how I’d target a £23k second income with £300 a month

If I was building a shares portfolio today, here's how I'd go about it. With these strategies I stand a…

Read more »

Investing Articles

How I’d invest my first £1,000 in a SIPP

Investing the first £1,000 in an SIPP can be a daunting process, especially for new investors. Zaven Boyrazian explains what…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »

Investing Articles

How I’d invest within a SIPP to target a 7% dividend yield

Zaven Boyrazian explains the steps he’d take to target a high-yield, income-generating SIPP for 2024 and beyond by investing in…

Read more »

Investing Articles

No pension at 50? Here’s my SIPP investment plan to target £16k a year in passive income!

With disciplined saving, a solid investment plan and the tax benefits of a SIPP, it’s possible to turbocharge pension growth…

Read more »

Young woman holding up three fingers
Investing Articles

These 3 investing steps could make me an £11,680 passive income!

If I was starting out on my investing journey, here's how I'd try to build a robust passive income with…

Read more »

The words "what's your plan for retirement" written on chalkboard on pavement somewhere in London
Investing Articles

Small SIPP at 55? I’d take these steps to boost my retirement savings

With a consistent savings plan, sound strategy, and some wonderful tax relief in a SIPP, it’s possible to massively grow…

Read more »