Although retirement may seem far away, especially to young workers, retirement preparations should begin many years before you reach retirement age.
By not planning in advance, you could risk not having enough money during your retirement to live comfortably, or you may struggle to retire until you’re very old. So, what do you need to do to prepare for retirement throughout your working years? Here are the four main steps you should take:
1) Start a personal pension
Although all workers in the UK should now have a workplace pension if they’re at least 22 and earning over £10,000 per year, these workplace pension contributions may not be enough to sustain your lifestyle when you retire, especially if you live for a very long time. This is why many people are now choosing to start their own personal pensions, which can supplement their State Pension and workplace pensions.
Your personal pension will help you plan your financial future and save money gradually over many years. You can choose how much you save and adjust your savings goals as your circumstances change, giving you all the flexibility you need. Remember that you’re never too young to start saving for retirement!
2) Track down old pensions
Nowadays, most workers change jobs much more frequently than workers did in the past. This can mean that you have multiple workplace pensions from various jobs you’ve had over the years, and finding the pensions from jobs you had decades ago can be very difficult!
As retirement approaches, you may find that you need help tracking down all of your old workplace pensions. The Pension Tracing Service is free and can help you trace old pensions even if you don’t have the contact details, as long as you provide them with as much information as possible about all of your old jobs. By tracking down these pensions, you can ensure you get all of the money you’re entitled to when you retire.
3) Settle your debts
If you’re thinking about retirement, you should really start getting your finances in order. A major part of this is paying off any debts as soon as possible, as you don’t want to be worrying about debt repayments once you’re no longer working. Perhaps the biggest debt that most people face is their mortgage. If you’re still paying off your mortgage, work out when you want to retire and how to finish making repayments before this point.
4) Plan what to do during retirement
The idea of relaxing and doing nothing throughout retirement may sound enticing when you’re sick of your 9-5, but the reality is that you could quickly become frustrated if you have nothing to do and look forward to when you retire. To keep your mind and body active during old age, which is essential for living a long life, make sure you plan out what sort of things you’ll do during retirement, such as volunteering, social groups, classes or travelling. If your planned activities require more money (e.g., travelling the world), you’ll need to factor this into your retirement savings plan.
Don’t leave it too late to start saving for retirement! No matter your age, follow these essential steps to start preparing for this next life stage.
