Let’s be honest, we all think about retirement once in a while. Even if you’re young and fit, you’re longing for the days when you don’t have to work your butt off every day. Ironically, it’s actually crucial that you think about retirement from a young age. If you do, then you have more time to start planning ahead and saving for this part of your life.
Speaking of which, how can you save for retirement? Well, there are a few different options and ideas to entertain. So, let’s take a look at them:
Enroll in your company pension
Do you work for a company? If so, they should have a pension scheme for you to enroll in. A lot of companies don’t automatically enroll you in the pension, so you have to make sure that everything is set up for you. It obviously saves them money if people don’t enroll, which is why they don’t automatically do it.
Anyway, you will be given the option – it’s not something they actively try to hide. After all, a lot of people won’t want to work for a company that doesn’t offer a good pension. In fact, if the company you work for doesn’t offer a pension, you should definitely consider finding a new job instead.
Company pensions tend to work the same way. A percentage of your monthly wages gets deposited into the pension pot. At the same time, the company contributes some money towards your pension as well. This could be the same amount that you contribute, it could be less, or in rare cases, it could be more. You may also see contributions in the form of rax relief and other things, further increasing your pension pot.
All of this happens behind the scenes and is great because you don’t have to think about saving money. The paycheck you get will already have your pension savings taken out of it. Therefore, you can simply budget your life around what’s left.
Enroll in a private pension
Likewise, you can also enroll in a private pension scheme. This will work similarly, only you are depositing money into a pension fund every month. So, it’s a lot more like a normal savings account in the way in which money is saved. As such, you have to take your budget into account to ensure you’re saving what you can afford to save.
As with a company pension, you do get to have contributions added by the pension provider. This is what makes private pension schemes better than regular savings accounts. Overall, you can save a lot more money because of the contributions.
Of course, the big difference between a pension pot and a savings account is that money can’t usually be taken out of your pension until you reach a certain age. So, this is very much a way to save money for your retirement, while a savings account is good to save for short-term goals – like buying a car or a house.
Speaking of which…
Invest in property
Buying a house can be a brilliant way to raise funds for retirement. This might sound a bit strange, but it is true. Property investments are some of the best investments you can make. On average, house prices will increase over time. The houses in your current area are probably worth ten times what they were worth 50 or 60 years ago. Okay, that might be a stretch, but they could genuinely be double the price right now.
So, the idea is that you invest in property, buy yourself a house, then sell it when you retire. It’s not a farfetched idea as so many retirees do this. The reason it makes so much sense is that you’re sitting on so much equity when you have a home. There is a lot of money that you can use to fund your retirement if you sell the property.
Furthermore, when you retire, you will likely have an empty nest anyway. Any kids you’ve had will be long gone living on their own. So, you may have a large family home with two people in it. Lots of retirees decide to downsize and move into small retirement communities instead. Some of the money from the sale goes towards a small condo, but there is still loads leftover to help you when you stop working.
Check additional retirement saving options in your country
Another way to save for your retirement is by looking at some of the different options available where you live. Now, certain countries have different things that residents can use to save more money than a normal savings account. In the UK, there are ISAs, which allow you to save lots of money every year and receive much higher interest rates to gain more savings. There are also tax-related benefits, helping you save even more money.
In Australia, you have self-managed super funds. These have become very popular, and as it shows here https://swyftx.com/au/smsf/, you can even find SMSFs dedicated to crypto assets. The idea is that people pool funds together and invest their money to make big gains over time. When you retire, you can withdraw your funds and use the money how you wish.
Then, in the US, there’s the Roth IRA. It’s similar to an ISA in that you save money, but the money gets invested into different things, which is why the interest rate is so high. The names are different, and there are subtle differences, but the concepts are the same.
Your best advice is to look online and see what’s being offered where you live. Most governments do have schemes like these to help people plan for retirement and make significant savings in the future.
How much money should you save for retirement?
In all honesty, nobody really has a figure for this. The key is to ensure that you have a decent source of income during your retirement years. Naturally, with a lot of pension funds, money is paid to you every month, almost like a wage. Here, it is suggested that you get around 70% of your last salary.
But, don’t take this as the law. It totally depends on you and your current situation. For all I know, you could be ready to retire right now, but with multiple sources of passive income fuelling your life. You no longer have to work because you’re already getting money from different business ideas and other sources. So, the amount you should save totally depends on each individual and their own personal situation.
On that note, we have come to the end of this piece. Are you currently thinking about retirement? Even if you have no plans to retire for many decades, this is still something that should be on your mind. Primarily, you should think about it in terms of how to save money. Enroll in your workplace pension, and ensure you set a private one up if you are self-employed. Then, pursue other ways of saving money over time. Buying a house can be a big step, as can setting up other accounts to save money. Try to take advantage of anything your government offers by way of tax advantages for retirement savings – like an ISA, IRA, SMSF, etc.
Slowly but surely, you can put lots of money away to ensure that your retirement years are not full of financial worries. Who knows, you could save so much that it lets you retire a little bit earlier!