For the vast majority of us, our entire lives are spent either running a business or working in one. Once we finally punch in or logon for the last time, we then have a new concern – how do we keep paying our bills with no monthly paycheque?
Now most seniors will have either a private, government or military pension, but if anything like me – you will want to spend your golden years doing things you enjoy.
Investing for retirement is a question we should be contemplating from a young age. In this article we will look at different methods, vehicles and tips on how to invest for your retirement.
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Should I invest if I already have a pension?
Yes, you should consider investing outside of your pension providing you have the means to do so. A pension is designed to limit risk and provide a relative return over many years, but the ultimate function is that the applicant pays very little every month, so that on retirement they have the ability to support themselves. Pensions are considered extremely low risk and are designed to limit exposure while keeping your capital growth in line with inflation.
Although pensions are protected by the FSCS and there are other measures in place to ensure the security of your capital, it does not make them invincible.
If you’re looking to make higher yield returns than what a pension will offer, then it’s advisable to consider investing outside of the pension as opposed to changing your pension’s overall risk appetite.
Is a pension a legal requirement?
In many countries, having some form of pension is not legally required, but highly encouraged for retirement planning. However, in the UK, workplace pensions are mandatory for eligible employees through auto-enrollment. This requires employers to automatically enroll staff into a workplace pension scheme and make contributions.
What’s the average age to start saving for retirement?
Most financial advisors recommend starting to save for retirement as early as possible, ideally in your 20s when you begin earning an income. The earlier you start, the more time you allow for compound growth. However, the average age to start saving for retirement is around 30 years old.
What’s the average amount someone saves for retirement?
The amount someone should save for retirement can vary greatly based on factors like desired lifestyle, life expectancy, existing savings/investments, and Social Security benefits. However, as a general guideline, many experts recommend saving 10-15% of your pre-tax income each year starting in your 20s. The average retirement savings by age 65 in the UK. is around £250,000.
How much pension will I have by the time I retire?
The amount you’ll receive from a pension depends on the type of pension, how long you contributed, your income levels during your working years, and any other factors outlined in the pension plan details. For an estimate, review your annual pension statements or use an online calculator based on your pension details.
Will a pension cover all my expenses in retirement?
For most retirees, a pension alone will likely not cover all retirement expenses, especially rising healthcare costs later in life. This is why it’s recommended to also have additional retirement savings in other investment accounts.
Can I invest my pension?
With a defined benefit pension, your money is pooled and invested by the pension plan on your behalf. With defined contribution plans like a SIPP ((self-invested personal pension)you can choose how to invest your money across the available funds offered by the plan.
What Investment Products are best for retirees?
Some common retirement investment products include bonds, annuities, dividend-paying stocks, target date funds, real estate investment trusts (REITs), and certificates of deposit (CDs). These tend to focus on generating income with lower risk than growth stocks.
How much should I invest for retirement?
A common guideline is to try to save 10-15% of your pre-tax income each year starting in your 20s or 30s. However, the specific amount can vary based on factors like desired retirement lifestyle, existing savings, pension income, etc. Using a retirement calculator can provide a better personalised target.
How much should I keep in savings for retirement?
In addition to dedicated retirement accounts, it’s wise to have 6-12 months’ worth of living expenses in cash savings as an emergency fund. This cash buffer can prevent you from having to make untimely retirement account withdrawals during market downturns.
How do I create a retirement investment strategy?
Start by evaluating your current finances, estimating retirement costs, setting an age and savings goal, and assessing your risk tolerance. Then determine the right mix of investments that can potentially provide the growth and income needed to meet your goals within that risk profile. Be sure to diversify across different asset types and rebalance periodically.
What different retirement strategies are there?
Some common retirement investing strategies include:
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- The Age Rule: Holding stocks equal to your age subtracted from 110 or 120
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- The Income Method: Focusing investments on generating steady retirement income
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- Growth Investing: Continuing to pursue capital growth even in retirement
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- Liability-Driven: Structuring investments around covering set future expenses
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- The Bucket Strategy: Segmenting assets into different time-based “buckets”
In the UK, some additional considerations when investing for retirement include taking advantage of tax-advantaged accounts like Stocks & Shares ISAs, Personal Pensions, and SIPPs. The State Pension also factors into overall income planning. Common retirement investments include bonds, equities, property funds, and annuities.
For Ireland, the State Pension plays a key role, but it’s recommended to have private retirement savings as well through Personal Retirement Savings Accounts (PRSAs), occupational pensions, investment accounts and property. Tax reliefs are offered to incentivise retirement saving.
Alternative Investment Firm London
If you’re interested in exploring alternative investments like private equity, venture capital, hedge funds or real estate to further diversify and bolster your retirement portfolio, the team at New Capital Link can provide guidance. With offices located in the prestigious Berkeley Square in Mayfair, London, we specialise in introducing qualified investors to leading alternative investment managers worldwide.
Our extensive due diligence process ensures we only represent top-tier funds across a range of strategies and asset classes. Whether you’re an individual looking to allocate to alternatives for the first time or an institutional investor wanting to expand your current exposure, New Capital can facilitate unique investment opportunities tailored to your specific needs and risk profile.
To learn more about how our independent fund advisory services can complement your existing retirement planning strategies, schedule an introductory consultation with one of our senior investment professionals. We look forward to discussing how alternatives could benefit your portfolio while striving to achieve your long-term retirement goals.
