Planning for a better retirement in your 20s, 30s, 40s, 50s, and 60s

Last month, research from Prudential reported over a quarter of British retirees are likely to downsize their house to fund their retirement.

In order to avoid such drastic measures, you should start planning for your retirement as early as possible. Even if you can only afford to save a small amount, the earlier you start saving, the more time inflation will have to increase your fund.

Yet it is important to remember it is never too late to start planning for the future, and with this in mind, here is the QROPS Group guide to retirement planning at all stages of life.

20s

Even though retirement is a long time away, the earlier you start saving, the longer your money will have to grow. If you begin saving 3% – 4% of your wage during your 20s you will put yourself in a significantly easier position for the rest of your life.

If you are in England, you may want to consider an Isa or a regular savings plan for your retirement – so you have access to the money in case of emergencies. In the USA, the best way to save is arguably the 401(k), and in Australia if you have surplus cash placing more in your superannuation scheme would be beneficial.

However, you may first want to look into paying off your student loan and erasing any debts.

For advice tailored to your country of residence and unique situation during this time, you may want to contact an independent financial advisor who can outline the best strategy for you.

• You should first concentrate on erasing debt.
• From then the earlier you start saving, the better.
• Starting an accessible savings plan means your retirement fund can double as an emergency fund.

30s

When you hit your 30s, you are probably in a more stable financial place and have your feet firmly on the career ladder. Yet these developments often come with other milestones – namely marriage, a new house, or children.

At this stage you will therefore need to re-assess you debt, ensure you have ‘rainy day’ savings, and, importantly, begin properly saving for your retirement fund.

Factors to consider include whether your company offers a suitable pension scheme (and if it does, you may want to take an active role in how it is invested). A major benefit of company pension schemes is the fact many are ‘topped up’ by your employer, the government, or both. Not saving for retirement this way means you are effectively turning away free money.

Alternatively, starting your own retirement fund outside of work is a great way to take control over where you money is invested – and could see you enjoying substantially more money when the time comes to retire.

• Your 30s is a great time to start saving for retirement (whilst not ignoring any debts).
• Saving for retirement with a work pension scheme means you may double your savings each month.
• For greater investment freedom, a personal retirement fund may be preferable.

40s

Ideally, by the time you reach your 40s you’ll already have built up some retirement savings.

If you haven’t already started – it isn’t too late. You should start saving between 15% – 20% depending on how you would like to live during your retirement, and make good use of any bonuses or pay rises during this time.

You should hopefully be in control of your debts and living the life you would like to continue throughout retirement. This second part allows you to assess exactly how much you will need to be comfortable and make sure you are on track to receive it.

If you are thinking about retiring early, you will need to factor this into your savings and make sure you’ll have enough to last the duration.

• If you haven’t started saving, now is definitely the time.
• Any bonuses or raises should equate to more money in your retirement plan – rather than a temporary increase in your current circumstances.
• Ensure you understand how much money you need to save to create a comfortable retirement. You may want to enlist the help of a financial planner to do this.

50s

This decade is perhaps the most significant in your retirement planning.

Firstly, do you have a retirement date in mind? It might not be definite, but it could serve as a guide. Then, you need to calculate the sort of income you want, take a detailed look at how your pension is performing, and align your fund to your preferred income option.

At this stage you may want to take your money out of equities and put it into cash investments to avoid a stock market lurch dampening your retirement.

Hopefully, you’ll have accumulated a sizeable pension fund by this age. If you have worked and are based in England, you may want to consider using a Self-Invested Personal Pension (SIPP) for greater investment control of your pension. If you have worked in England but now live abroad, a QROPS is a great way to transfer your funds into an accessible pot away from the UK’s pension income charges and death tax.

Lastly, you may want to consider maximising your contributions, as this is ultimately your last chance to increase your pension pot’s size.

• Intensify your contributions.
• Remove risk from your plan (or increase it if you prefer greater control).
• Set a retirement date and plan and ensure your fund will be adequate.

60s

Depending on where you live, this is probably the decade in which you are going to retire.

Now is the time for key decisions which will affect how you receive your pension income throughout retirement, and for this reason it is vital you take independent financial advice at this stage.

You should have a firm retirement plan in order. But if you do not, help is at hand. A financial advisor can also help assess you individual situation and consult on alternative means to raise money for your golden years.

If you are in the UK and being asked to buy an annuity make sure you shop around as there are huge differences in the market.

At this time, debts like mortgages and personal loans should either be paid off of very low. Yet you may be paying out in other expensive areas – such as helping out with grandchildren. This is an important issue to cover.

• Talking to a financial advisor is vital at this stage.
• Check that all your debts are appropriate and manageable.
• Enjoy your golden years!