When you’re young, your retirement is probably the last thing on your mind, but the truth is, the sooner you start preparing for your retirement, the easier it’ll be for you in the future.
Can’t I just count on the state pension?
Relying on the state pension isn’t good enough. As of April 2021, the maximum pay-out will be £179.60 weekly, but knowing that the average cost of living in London is £2,249 a month for one person, this is not even close to enough if you want to live a decent life during your retirement. You also have to consider that your expenses are higher in your retirement since you might need medication or specialized care.
Add to that, the age of eligibility for claiming UK state pensions is now 66, and there are talks that it will increase to 68 by 2040. While it’s illegal for employers to fire someone based on their age, if you work in a strenuous environment, it’s impossible that you can continue to work until that age. We’re also forgetting about ex-pats who may be working in countries without provisions against mandatory retirement. In some countries, it’s customary to fire someone as soon as they reach their 50s, and when you’re that age, it’s even harder to find work again. If you’re a young professional working abroad, you may want to look into other investments to serve as a backup for your retirement. Check out tailormadepensions.eu to find personal finance experts who can lead you on the right track.
What about my workplace pension?
There are two easy ways you can contribute to a pension fund. One is through your state pension, which you need to contribute to for at least 10 years to be eligible for a weekly pay-out, and another is your workplace pension, which you pay through your employer. The employer also tops up the amount, depending on your contribution.
While it’s a good system, it’s not perfect. If your company goes bankrupt, their contributions to your pensions stop. While there are systems in place to protect pensioners, who were under this scheme, you wouldn’t get the full amount you would have expected to receive.
What should I do to ensure a comfortable retirement?
One of the ways you can lower the risks is by diversifying your investment portfolio. By not having all your eggs in one basket, you can still have something to turn to in case one of the schemes fail. One fool-proof way you can ensure a good retirement is by saving money now. If you make £80,000 a year, saving even just 20% of that each year can leave you with a substantial amount by the time you’re 60. There’s also the option of investing in the stock market or in bonds.
Retirement can be tough on those who don’t adequately prepare. As early as now, try to predict how much money you’ll need during retirement. By knowing this you can monitor if you’re on track to meet that goal and take action if you’re falling short.