As odd as it may sound, if you’re in your 40s and you have no savings at all, you’re actually still in quite a good position to get rich and retire early.
You’re not so young that you’ll carelessly throw money at any dodgy get-rich-quick scheme that comes along, and not so old that you’re afraid to take any risk at all.
From April 2020, the State Pension will increase by 3.9%, which means you’ll get £6.60 extra per week for a maximum of £175.20. A total of £9,110.40 a year might cover your basic needs, but most of us will need a lot more if we’re actually going to enjoy our sunset years.
The main thing we’ll be covering here is how to get from where you are now to a more stable and comfortable place.
Compound science
The best tip you’ll ever get is to reinvest any dividends you earn and compound your way to greater wealth. Most Stocks and Shares ISAs or SIPPs will have an option to do this automatically.
This financial wizardry means that the sooner you start to invest, the more likely it is you’ll be able to enjoy a comfortable retirement.
Set aside regular payments into a share-dealing account and there’s also less temptation to spend that extra cash and a better chance of growing a sizeable nest egg.
A buy-and-hold strategy requires careful planning. You might want to take a look at a UK dividend ETF too, which will diversify your portfolio at an extremely low cost.
If you can let compound interest work its magic, you’ll be shocked at the amount by which you can grow your savings.
The biggest mistake of your life
Most people don’t have the patience to do proper research, find quality companies to invest in, and stick with their choices even when the market is going down. If you’re going to get rich and retire early, you need to take this on board.
When you’re investing over the course of 20 years or more it won’t all be sunshine and rainbows.
There will be times when share prices go down, and this is when most newcomers panic-sell. They think it’s better to realise a £50 loss today than face the possibility they’ve made a terrible mistake and take a potential £500 loss at a later date.
But if the share is essentially a solid one, when the market rebounds — as it invariably does — they’ve sold out and must now pay a higher price and another trading fee to get back in.
Go out happy
Thinking about your pension can be scary at any age. Especially if you feel like you’re behind on your savings.
There’s also the unenviable thought that by the time you get to your late 60s you’ll have gone grey, sprouted hair from your ears and developed an odd fascination with playing golf and wearing cardigans.
Thankfully it’s relatively simple to make this the least of your worries: start small, save often and you’ll be in a healthier position before you know it.
