Unless you feel happy about living on the new State Pension, which currently delivers a maximum yearly income of just £8,546, you are no doubt thinking about sorting out some additional savings to live on in retirement.
But thinking about it doesn’t always lead to doing it. Don’t panic though. Here are 10 steps that you can take right now to turbocharge your retirement – whatever age you are now.
Step 1 – Start now
It’s important to start right away. The longer you save and invest for retirement, the easier it is to generate enough additional money to ease your financial life in retirement. But if you are knocking on a bit, start now anyway. All is not lost, but you must do it. Do it now!
Step 2 – Choose a tax-free wrapper
You can make your savings and investments work even harder for you by sheltering them in an account, or wrapper, that provides some form of tax relief. Generally speaking, pensions benefit from tax relief on the money you pay in and Individual Savings Accounts (ISAs) allow you to draw your money out free of tax.
However, regardless of the choice of pension funds and ISA accounts available to you, I reckon it’s almost always a good idea to pay money into your employer’s workplace pension scheme if you have the opportunity because your employer will then usually pay the equivalent of 3%-10% of your annual salary in for you on top of what you contribute.
Step 3 – Choose a fund or funds
Over the long haul, shares have performed better than most other classes of asset but you don’t have to devote your life to investing to benefit from the returns available from the stock market. Instead, just choose a managed fund or simply invest in an index-tracking fund such as one that aims to replicate the performance of the FTSE 100 index.
Step 4 – Set up a Standing Order
The key to effective retirement saving is to make consistent payments into your savings pot. Setting up a monthly standing order payment from your bank account into your investment funds will make sure that your retirement plan remains on track. Do your budgeting sums, fix the payment and its done before you have time to miss it.
Step 5 – Review your Standing Order every year and try to raise it
The more you pay in the better, so try to keep up with inflation or improve your payments if your income rises or if your other expenses fall.
Step 6 – Get on with your life
If you made it to this step you’ve got it sorted. Now just work, rest, relax and play. Enjoy your life and don’t worry about retirement any more.
Step 7 – Retire
When you have enough money saved, or when you are old enough to draw the State Pension, stop working and prepare to reap the rewards of your retirement-saving efforts.
Step 8 – Stop your standing order
When you stop earning, stop paying.
Step 9 – Switch to draw down
Now that you’ve retired, it’s time to draw regular money out of your retirement savings pot.
Step 10 – Enjoy your retirement
Good luck with your retirement-savings plan.
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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.