When you get to retirement age, you want to be focusing on the positive aspects it can bring – the fun, the relaxation, the chance to take up new activities or indulge in old hobbies – not worrying about your financial situation. Unfortunately, research has suggested that far too many people regret not saving enough for their retirement, and that could put all those future plans on hold.
Research from the de Vere Group found that 34% of over-50s surveyed cited not saving enough for retirement as their biggest financial mistake, with it having the most significant impact on their finances. This highlights the importance of saving early, as having enough set aside could make all the difference to your financial stability in later life – and failing to do so will add unnecessary stress during a time you should be enjoying.
"It's with a depressing predictability that this survey concludes that more than a third of the over 50s feel that they have not accumulated enough funds," said de Vere's Nigel Green, founder and CEO of the financial advisory group. "The harsh reality is that unless there's a seismic cultural shift in attitudes towards savings, many more people will reach the age of retirement and realise that there is just not enough in their pension pots to last throughout their retirement, or enough to enable them to enjoy the retirement they had envisaged."
It's a worrying thought, and one that's put into even sharper context when you realise just how much money you'll need. Life expectancy is increasing, which means the funds you've saved could need to last two or even three decades, and you'll also need to account for medical and care bills in later life. Interest rates are low, as are annuity rates, making it even harder to properly supplement your income, and don't think that the state will plug the gap – the state pension invariably won't be enough to cover all essential bills and give you the retirement you're hoping for, so putting money aside now has never been more important.
Whether you're in your 20s, 30s, 40s or beyond, you need to make sure you're suitably prepared for later life. Start saving from as early as possible to maximise your returns – thanks to compound interest, you could be thousands of pounds better off if you saved little and often from a young age, rather than if you saved bigger chunks from a later date. But just where should you stash your cash?
Well, having a workplace pension should be high on the list of priorities. Saving a proportion of your earnings for retirement is something that we all need to get into the habit of, and because you're getting employer contributions as well as tax relief, you could benefit even more.
Then you should consider cash ISAs. These accounts will pay you interest that's entirely free from tax, and although rates aren't exactly enticing at the moment, the flexibility and tax-efficiency offered make them well worth considering. Or, if you've got a slightly higher risk appetite, stocks & shares ISAs could be a viable alternative. They offer the potential for better returns with the trade-off that your investment isn't as secure – there's no guarantee of returns, and if your funds don't perform well, you may end up with less than you put in.
No matter what kind of savings vehicle you choose, it's vital you weigh up all the options so you can maximise your returns. Then it all comes down to deciding what to do with your hard-earned savings in retirement, and that's when seeking advice becomes even more important. It's one of the biggest financial decisions you'll ever make, and whether you choose an annuity, income drawdown or something else entirely, it can have a huge impact on your financial future.
However, the study found that not everyone realises the importance of expertise, with the second most-frequent financial error cited by respondents (at 27%) being the belief that they could successfully manage their finances without professional advice. This is far from ideal, particularly if you're approaching retirement: you'll need to decide how you can secure an income for several decades without being in full-time employment, and the only way to be confident in your choices is to seek the advice of professionals.
Mr Green added: "The survey highlights that too many people have previously believed that they could 'go it alone' managing their wealth, and have committed costly blunders along the way. The most important things in life, including financial security, cannot be left to chance. The best way to safeguard and maximise wealth is to devise, manage and implement a tailor-made plan with a professional."
So, whether you're coming up to retirement or are years away from hanging up your work shoes, don't make the same mistakes. Make sure to start saving as much as possible from as early as you can, and if you're approaching retirement age, get plenty of advice so you can be confident in your final decisions.
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