We’re all told that we should be doing it, but how many of us have a watertight plan for our future financial needs? The story of people enjoying a life in comfort, only to plunge into poverty in their later years is an all-too familiar one. Ironically, the more wealth that individuals have when they are younger, the more likely they are to end up existing on a meagre budget in old age, so here are 6 golden rules for ensuring your future finances shine.
1) Decide What Retirement Looks Like
Do you envisage keeping all of your properties in retirement? Can you picture yourself in the UK, or somewhere warmer? How many vehicles do you think you’ll require when the children have left home? When planning your retirement, formulate a scenario that is realistic and based on your current financial status rather than wishful thinking.
2) Set a Target Retirement Age
Your retirement age is the benchmark number against which all other calculations are made. Remember, ‘retirement age’ doesn’t have to represent a commitment to shed your youthful identity and don a pair of slippers. Rather, it is the date at which your plan rolls into action.
3) Set an Income
It is helpful to think of your retirement plan in the same way as a salary, with the crucial exception that you will be paid to simply enjoy yourself. Ask yourself how much you want to pay yourself per year to live the life that you picture in your retirement. Even if you expect your income to rise between now and then, ensure that your future salary is based upon your current financial status – you can always adjust the figures later.
4) Understand The Benefits of Pensions
There is a lot of misunderstanding about pensions, especially regarding the varieties available. Pension plans can be comfortable, cautious, and reliable, or can involve exciting high-risk investments with considerable returns. Either way, pensions ensure that you control your future income, and are therefore central to realising a retirement plan.
5) Think About an ISA
Individual Savings Accounts (ISAs) can be an astute option for investors. A maximum amount of £20,000 can be added every year, which with careful growth management has enabled some individuals to build portfolios with a value in excess of £1m. The best part about ISAs is they’re totally tax free.
6) Start Now
The earlier that you start planning for your retirement, the healthier the finances will be. The benefits of long-term planning include being able to optimise the potential of ISAs, being able to make smaller pension contributions, and building achievable future goals. Additionally, early planners benefit from being able to adopt a more flexible approach to financial management, such as being able to take a year or two off as circumstances demand.
Next Steps
When it comes to planning a secure retirement, it pays to start early and to make decisions with the support of an experienced financial adviser. Whatever retirement ambitions you hold, Arlo Group’s team of experts are here to help. For more information, please arrange an initial consultation with one of our wealth management advisers.
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