No pension savings at 60? I think you can still retire wealthy with these tips

If you’ve reached 60 years of age without any pension savings, don’t panic! There’s still plenty of time to retire richer if you start saving today says, Rupert Hargreaves.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If you’ve reached 60 years of age and have no pension savings, then now is the time to take action to build a retirement pot.

The good news is, it’s not impossible to build a sizeable pension pot in the years you have left before retirement, although it will require quite a bit of effort and you may have to work a little bit longer than expected.

So, if you fall into this bracket, here are my three tips to help you make the most of your money.

Open a SIPP

My first tip is to open a SIPP. Any money you contribute to a SIPP is entitled to tax relief up to your marginal tax rate. Anyone under the age of 75 can pay into a SIPP and even if you are not earning, you can contribute up to £2,880 net each tax year and still receive tax relief.

If you’ve nothing saved by age 60 and you want to retire more comfortably, making the most of this tax benefit while you can is vital.

Save, save, save

My next tip is to start saving as much as possible, as soon as possible. Time is the greatest advantage investors, and savers have. And the sooner you start saving, the better because it allows your money to start earning money and the benefits of compound interest to work their magic. The longer you put off saving, the harder it will become.

Invest for the future

My final tip is to invest for the future. You are going to need all the help you can get if you want to build a sizeable retirement pot from a standing start at age 60.

By investing in the stock market, you can boost your returns, but it is not advisable to invest with anything less than a 10-year time horizon. So, if you want to squeeze as much money as possible out of the stock market, you might have to delay your retirement date.

If you can, it is certainly worth doing this. Over the past decade, the FTSE 250 has produced an average annual return for investors in the region of 9%. The FTSE 100 has returned an average of 7% per annum over the same time frame.

Assuming an annual growth rate of 9%, I calculate it would take contributions of £2,000 a month (or £2,500 including tax relief) to build a pension pot worth nearly half a million pounds over the space of 10 years. This is enough to produce an annual income of £20,000 or approximately £28,550 including the State Pension.

At a rate of 7%, you could build a similar sort of retirement pot with contributions of £2,700 a month.

If you are willing to take on a bit more risk, it is possible to build a much larger savings cushion, although I should caution that this is not guaranteed. 

Some active small-cap investment funds have returned low-teens annual gains during the past few years. If you can achieve a rate of return of 12%, for example, that would be enough to turn monthly contributions of £2,500 into a pension pot worth nearly £600,000, enough to give you an annual income of £24,000 excluding the State Pension in retirement.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »