If you’re 50 with no retirement savings, you may be worried about retirement. After all, the State Pension – the income that the UK government pays to those in retirement – is just £175.20 per week, or £9,110.40 per year. That’s not enough to live on.
No savings at 50 isn’t an ideal situation. However, it’s also not the end of the world. Act quickly, and you could still build up a savings pot of £300k+ for retirement. This level of savings, combined with the State Pension, should enable you to live a comfortable, stress-free lifestyle in retirement. Interested to learn more? Here’s what you need to do.
Now’s the time to start saving
It goes without saying that if your goal is to retire with that sort of amount, it’s crucial to start saving immediately.
My advice here? Go back to basics. Draw up a budget. Cut down on expenses. Pay yourself first. And save all you can. Even if you can only save a little bit of money, get into the habit of saving regularly. This will put you on the path to financial security.
The right savings vehicle for retirement
Don’t just save into any old account though. Instead, take advantage of the amazing tax-efficient retirement saving vehicles that are on offer today.
A good example here is the Self-Invested Personal Pension (SIPP) account. With a SIPP, the government rewards you for saving for retirement. To save £1,000, you only need to contribute £800 if you’re a basic-rate taxpayer. The government adds in the extra £200 for you.
This is a fantastic deal. If your goal is to hit £300k+ in savings before you retire, a SIPP is definitely worth considering.
Investing: the key to building long-term wealth
The final step is to invest your retirement savings properly. Leave your money sitting in cash and it won’t grow much. In fact, it will actually lose purchasing power over time due to inflation.
Invest your savings in growth assets such as stocks and funds however, and your money should grow at a healthy rate over time. Over the long run, stocks tend to generate returns of about 7-10% per year. Pick the right stocks (The Motley Fool can help you here), and it’s possible to do even better than this. For example, had you invested in Rightmove shares a decade ago, your money would have grown at nearly 25% per year.
You’d be surprised at the level of savings you could build up in less than two decades if you invest your money wisely. Save £10,000 per year from age 50 (remember, you’d only need to contribute £8,000 per year into a SIPP to achieve this) and earn a return of 8.5% per year on your money through the stock market, and you’re looking at retirement savings of more than £350,000 by age 67. That’s the power of the stock market. Over time, stocks can transform small amounts of savings into huge sums.
Overall, there’s nothing complicated about this ‘no savings at 50’ retirement saving strategy. All you need to do is save regularly into the right type of accounts and invest your money.
If you’re looking for information on how to invest for retirement after 50, you’ve come to the right place.
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Edward Sheldon owns shares in Rightmove. The Motley Fool UK has recommended Rightmove. 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.