If your mind has recently turned to your future pension needs, it’s normal to have a lot of questions.
When to start a pension?
How much to save?
With whom?
Is property or an ISA better?
What about tax implications?
These are just some of the common top questions our readers ask.
The answers can be found by taking self-help guru Stephen Covey’s advice:
Start with the end in mind.
An independent financial adviser is best placed to help you forecast your future needs, adjusted for inflation.
But you can do it yourself by looking at these factors:
- Look at your current spending
- When you stop work what costs can you reduce? Answers range from commuting costs to downsizing your home
- What costs will increase? Travel for example often goes up
- Look at your major maintenance risks like cars and homes to ensure you have some contingency
- Look at your health and lifestyle in terms of life expectancy- the average life expectancy is 85 for a healthy UK adult
- You can factor in inflation at 3% and factor in slowing down from around 80, so doing and spending less
Get A Personal Pension Plan
Independent Financial Advisors Can Provide A Long Term Plan
If you want to plan how much to save, invest and put into a pension, so that you can retire on time and enjoy a comfortable retirement, you should seek professional advice. It may cost less than you think.
This should allow you to set a target budget for year one of retirement.
In an ideal world, that budget would work back to 5% of your capital or pension pot that remains in your pension, and is invested to fund future years.
Most people shouldn’t take the 25% cash lump sum out of it will reduce your pension pot below this level.
You then have an investment target and can look at:
- Your retirement age options
- Your current savings, pensions, and other assets
- Your income, and income growth potential
- You saving ability between now and retirement
Again a financial advisor is best placed to help you look at how much you should save, and how you should invest it within a pension ‘wrapper’ to get to your pension pot target on time.
A professionally designed pension investment plan would active 8% - 12% compound growth annually, depending on the level of risk you can afford to take.
So you can adjust how much you save, how long you work and up to a point - subject to the right advice - the amount of risk you take to achieve the pension pot you need.
Investor Weekly recommends seeking professional advice to establish your propensity for risk, and to design a high performing investment strategy within a low cost pension wrapper.
