If you’re under the age of 40 and already thinking about your retirement savings, that’s great news. At this age, time is on your side and if you make the right moves now, you could really set yourself up for the future. With that in mind, here are three smart moves that could help you grow your retirement pot.
Learn about wealth-building
One of the smartest things you can do while you’re still young is educate yourself on how to build wealth over the long term. One of the main reasons why many people reach retirement with an underwhelming amount of savings is that they don’t have a good understanding of basic wealth-building concepts such as compound interest and stock market investing.
For example, many people don’t realise that by investing in stocks, they could potentially generate a return of 6%-10% per year on average over the long term. So, they keep their money in a bank account earning 1% or so and it doesn’t grow much over time.
By learning about how to build wealth effectively early on, you’ll give yourself a huge advantage over the average saver. These days, it’s easier than ever to learn about wealth-building as there are plenty of books and websites dedicated to the topic. You can find some great information right here at The Motley Fool.
Open a Lifetime ISA
Another smart move you can make at this age is learn about the different types of investment accounts that are available in the UK such as the Stocks and Shares ISA, the Lifetime ISA, and the Self-Invested Personal Pension (SIPP). All of these accounts can help you boost your retirement savings.
If you’re still under 40, I’d recommend opening a Lifetime ISA account. The reason I say this is that this type of ISA, which is only open to those aged between 18 and 40, comes with 25% bonuses from the government. Those who qualify for it can contribute up to £4,000 per year, meaning that if you put the full allowance in, the government will deposit an extra £1,000 into your account for free.
This is an easy way to turbocharge your retirement savings, so if you qualify for the account, it makes sense to take advantage of it. Just be aware that you can’t touch your savings until you turn 60 (or buy your first house).
Build a diversified portfolio
Finally, once you have learned about wealth building and have an account set up, aim to build a rock-solid retirement portfolio. Here, the key to success, in my view, is to construct a diversified portfolio that will provide steady returns over the long run.
It can be tempting to focus on high-growth assets when you’re young in the hope of retiring early, however, from my experience, that’s a risky strategy that can backfire on you. Capital preservation is extremely important when building a retirement portfolio as large losses can really set you back.
If you’re looking to learn more about building a winning long-term portfolio, you’ve come to the right place.
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