The dream retirement of living comfortably at home, indulging in a cruise or two a year, and generally spending time with children and grandchildren, is one to which many people aspire. The age at which we start looking towards the future differs of course, and some of will want to retire at 50 while others, work into their 80s to be financially prepared.
Unless we’re in our early 60s now we probably don’t know what age we’ll precisely retire, and certainly have no idea of the financial climate that will accompany it. The Daily Mail reported on the idea that workers could be allowed to retire at 60 if they take a lower pension, following a review by former CBI boss John Cridland. Even if the idea is approved, who is to say that another government won’t come to power and scrap it in 10-15 years’ time?
Therefore, planning for retirement and basing your finances on the current financial climate is a risky business. It’s less than 20 years since the Bank of England base interest rate was as high as 7.72%, which is 7.47% higher than today’s rate. In 1997 it was actually worth putting money into a savings account and watching it grow – in 2017 it’s barely worth it. Who knows what inflation, house prices and utility bills will cost in 2037?
That said, there are several tips to help you at least have some money in the pot for the years ahead.
If you’re intent on investing money, the key tip is to diversify throughout a portfolio rather than placing all your eggs into one basket. Savings accounts and cash ISAs won’t make your money work very hard, but at least they are fairly risk-free. Stocks and shares are riskier but could yield higher rewards if you get them right, so the usual advice is only to invest what you can afford to lose. Bonds, investments in antiquities, and setting up your own business are alternatives which will each require extensive research.
A safer bet could be property, since people will always need housing. After paying off your own mortgage, as cold as it seems, for those with money the current housing crisis could be a tasty little nest egg for those willing to capitalise on the rental or holiday home market.
If you can’t afford to buy a home on your own, and find the conditions of gaining another mortgage too onerous, then crowdfunding could offer a solution. Alternatively, you could sell your home (click here to find out more) and downsize, probably gaining far more from your home through built-up equity and rising prices, than you originally paid for it.
The government has done the hard work in some regards, by forcing employers to place their employees into a pension scheme for those over the age of 22 (with a few caveats). There are a huge number of different options, and perhaps the best method to get the retirement life you desire is to use a pension calculator that tells you what you need to save now in order to extract a good monthly income in later life.