How to Create the Perfect Retirement Plan

How To Create The Perfect Retirement Plan

Retirement, for many, is a chance to continue doing the things they love most, from following their favourite football team across Europe to getting away from the British weather for a winter in the sun. However, waiting until you’re 67 to step away from the working world entirely can feel like a long time away. It’s for this reason why many are looking into retiring early, on a plan which ensures they don’t have to give up any aspect of their current lifestyle.

Unfortunately, retiring on your own terms is expensive, especially if you want to enjoy the comforts and luxuries you’ve had since you first started to earn a wage. What’s more, your retirement is going to last a significant number of years, so preparing in advance for these years is crucial. How do you create the perfect retirement plan, however?

How Much Do You Have?

The average employee who has been working for several years will have a pension pot building up. All employers must provide workers with a workplace pension scheme, which employees are then automatically enrolled in. You are automatically enrolled if you meet the following criteria:

  • Aged between 22 and the state pension age – in 2019, the state pension age for both men and women is 66. However, it is going to increase further to 67 by 2026.
  • Earn at least £10,000
  • Classed as a ‘worker’
  • Work within the UK

How much you have within this pension pot will depend on a variety of factors, including what type of scheme you’re enrolled in, how much both you and your employer pay in, and the tax relief the government has added to your workplace pension.

The current minimum contribution limits are 5% for you as the employee and 3% for the employer.  That is a maximum of 8%.  Tax relief is also available in most situations reducing which makes up part of your 5% contribution thus reducing the amount you actually pay.

To work out how much pension you have to play with in retirement, you first need to discover how much is in your savings already. Once a year, your pension provider should send you a statement. However, you can also choose to check the amount online, should your provider allow you to track it via their website.

You can also check your State Pension online, using the gov.uk website. You can then accurately see how much you have for your pension.

How Much Do You Need?

Once you’re aware of how much pension you have, you need to work out how much you need.

How much do you predict your winter away in the sun will cost? How much, on average, is a season ticket for your favourite football team?

Also add into this amount the monthly outgoings you will still have: mortgage repayments, utility bills, and other lifestyle factors.

How To Achieve The Money You Need

Savings are the best way to build your pension pot up, but you need to be saving in the right places. Therefore, it’s highly crucial you find the best pension scheme for you and your savings. Of course, if you have the opportunity to pay more into your pension, it’s recommended you do so, as this is one key way to increase your amount.

Alternatively, you can choose to switch your pension from the government-backed workplace scheme to a private scheme. A private scheme may offer you higher interest on the money you pay, therefore, enabling you to withdraw a higher amount when you choose to.

Why A Pension Is The Best Plan

A pension plan is the best solution for ensuring you have the funds available to enjoy your lifestyle for the rest of your life. While employers now have a commitment to providing a workplace pension, if you’re not automatically enrolled, it’s imperative that you do so as soon as possible. There are several reasons why a pension is a wise move, including:

  • A pension is tax efficient. What this means is for every £1 an employee pays into a pension scheme, the tax man will you give 25p. When you’re ready to withdraw your pension, 25% is tax-free. If you accrue £100,000 in your pension pot, £25,000 is tax-free.
  • Today’s pensions are highly flexible. Long gone are the days where you had to buy a monthly annuity pension from an insurance company. Now you can draw as little or as much as you’d like out of your pension after the age of 55.
  • Your pension can be passed onto your loved ones in the wake of your passing. You can even leave it as a lump sum, so you know your family is looked after when you’ve gone.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Contact us to start your retirement plan.

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The Benefits of Saving Regularly

The Benefits Of Saving Regularly

There are often two types of investors. There are investors who already had money in their pocket, and now wish help to invest it somewhere. Alternatively, there are investors who didn’t have any money beforehand, but now they do, they want to build up their pot of money.

While both investors are aware of the benefits of saving, not many understand the benefits of saving regularly. What’s more, many investors don’t fully appreciate the benefits of committing to saving regularly.

The Benefits

Committed Savings:

By committing to saving regularly, perhaps a set amount every pay check, you are much more likely to build up your money, rather than spending it. Unfortunately, some saving accounts are easy to access, meaning the temptation to dip into them should you wish to can be tricky to avoid.

Stock Market:

As you’re not investing your money into the market at a single point, it removes the risk of getting the timing just right. However, using the stock market for your regular savings applies to those wishing to save for the medium and long term.

The ups and downs of the stock market are one reason why investors are afraid of it. However, the approach is known as ‘pound cost averaging’ is one to consider. Pound cost averaging is the approach of investing small amounts very regularly.

As the name suggests, it is the cost you spend buying stocks which average out over time. It helps an investor instill good behavior because you’re establishing a routine. This routine enables investors to consider the stock market as an ongoing activity, rather than one which relies solely on gain or is affected by a temporary loss.

How to Save:

For those wishing to save for the long term, choosing to save regularly is highly effective. You first need to assess why you’re saving. Often, savers decide to put money aside for their children, which may start from the moment their child is born until they leave for university at 18.

Tax Efficient:

Whatever your saving goals are, there is a variety of ways to achieve it. One such way is an ISA. An ISA is an Individual Savings Account, which offers tax-free interest payments. It means, by choosing this, you could get more for your money. However, there are limits, known as an ‘ISA allowance.’ This currently stands at £20,000 per annum

If you’re saving for a medium (5-10 years) or long-term goal (10+ years), choosing stocks and shares ISA could prove more beneficial.   A stocks and shares ISA is very different from a typical cash ISA.  Rather than merely paying money in, you’re investing in assets that have greater potential for growth compared to a cash isa account. Although cash ISAs are relatively secure, investing in stocks and shares does have varying degrees of risk associated with them.

Conclusion

Saving regularly can be the difference between affording the lifestyle you want, and not. A great example is the retiree who bought a Mercedes 2-seater sports car after leaving the world of work behind for the last time. How did he manage to do this? Simply by committing to saving a regular amount each month into a stock market investment unit trust. It took 20 years to achieve this goal, but by ensuring he didn’t miss a single payment, he could treat himself in cash to the car of his dreams. This is what long-term saving is about: enabling you to afford the luxuries you want after you’ve worked so hard all your life.

TKV Financial Management can advise you on the best saving plan for your situation. Contact us to arrange a meeting.

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What Are The Benefits of Financial Planning?

What are the benefits of Financial Planning?

Have you ever thought about financial planning? Creating a financial plan for yourself should be essential, and more people need to start doing it. Contrary to what you might imagine, it’s not just a case of creating a weekly budget and restricting your spending.

With proper financial planning, you can see your short and long term financial goals, which helps you develop a plan to ensure you achieve them.

As such, here are the main benefits that financial planning will bring to your life:

Become more tax efficient

Being tax efficient means that you only spend as much money on tax as you need. With financial planning, you will lower your tax expenditure and limit the cash leaving your accounts.

This is done by looking for tax-efficient investment options that ensure you aren’t paying income tax on certain earnings – like ISAs. By being more tax efficient, it ultimately allows you to keep more of the money that you earn every year.

Manage your income to save more money

One of the vital benefits of a financial plan is that it lets you get more out of your income. You can manage the money you make and understand how much of it needs to go on essential payments.

This provides you with an insight into how much money is left over to put in savings accounts or investments. As such, you waste less money, save more, and start living a more comfortable life.

Be more financially stable

Following on from the point above, putting together a financial plan will enable you to be more financially stable. Your plan should include introducing regular and consistent savings, placed into a savings account each month and by doing so will ensure that you always have these funds to fall back on if ever you need them, and this could be as a reward each year of a nice holiday or indeed should an emergency arise at any time then these savings will cushion the impact and enable you to avoid falling into debt.

Reach your specific goals

It was mentioned in the introduction, and the whole purpose of financial planning is to help you achieve specific financial goals. If you’re hoping to save up for a new car or house, then it’s crucial to have a financial plan in place that allows you to reach this aim in as little time as possible.

If you’ve got a more personal goal of earning a specific amount of money through investments, financial planning creates an environment where you will achieve this. Plans are tailored to each individual based on your long and short-term goals. If there’s something you want to aim for – financially speaking – then you need a plan to create the framework for you to follow.

There’s no denying that financial planning presents some very impressive benefits. Anyone that wants to gain control of their finances and make the most out of their money needs to consider it.

Consulting with financial advisors and developing a financial plan will help you achieve stability and security. It’s an excellent way to help improve your current financial situation while also setting you up for a stronger future as well.

Levels of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

If you are looking for an Independent Financial Advisor, please do get in touch.

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