What should you focus on now to guarantee good finances for retirement?

By Jenn Taft

Retirement feels a long way away but what could you be doing now to help you prepare for it financially?

When you are in your 20s and 30s, planning for retirement seems like something you don’t yet need to worry about. A few changes to your finances though could see you set up ready for when you do finally retire, and the sooner you get on board, the better.

So what can you do to prepare?

In your twenties… Start saving early

Those shoes that you must have and cost hundreds? Put them down, you don't need them.

You can curb your outgoings and you know it. So take a bit of that expenditure and put it away for the rainy day that is retirement. You could even set up a standing order to go out of your bank account on pay day. That way you'll never miss the money because you never even saw it was there! In no time at all you will find yourself with a healthy looking savings account.

If you do not have a savings account already then look to apply for an ISA, or Individual Savings Account. These accounts have tax relief on £15,240 each year, so your money can grow successfully without the tax hit.

Build your pension fund

Pensions are a great way to save for retirement but why start now?

The earlier you start putting money away into a pension the bigger the pot will be when you retire. Using a pension calculator can help you to see what money you will need to put away for a specific pension amount. Having this in mind will allow you to better prepare for the lifestyle you want to have when you retire and will identify any shortfalls that need to be made up. Starting early also means you can put away a smaller amount each month - the later you leave it to start your pension fund the more you will have to find to cover it. The difference to your pot by starting earlier, depending on employer contributions, could equate to between £200-400,000. That’s a huge amount of money!

If you don’t currently contribute to a pension through your job have a word with your employer to see if there is a scheme to enter in to. If there isn’t then make an appointment with your bank or a financial advisor to see about setting up a personal pension. Having this alongside the state pension will make for a good retirement fund, and you will feel safer financially if you are not just relying on the state pension alone.

Unsure what a pension scheme does? Have a look here for a clear explanation of how your contributions will help you prepare for the future.

Do you deserve more?

Have you gone a while without a pay rise? If you genuinely feel there is reason to ask for a pay rise then gather the facts together, make an appointment to see your boss and sit down and make your case. The worst that could happen is that they say not now and come away realising that you are ambitious and wanting to do well. Or you get the push you needed to go get a job elsewhere that will pay you your worth. The more money you can make now, the more you will earn over your lifetime. Even £1000 more a year could amount to an extra £40,000 in your pocket over your working lifetime. It's worth finding your confidence to be brave and ask!

And in your thirties? Put your money in property

I am a big believer that property is one of the best things you can put your money into. Towards the end of your twenties and going into your thirties is when people tend to settle into a long term property investment as their home. If done carefully, you could buy a property cheaply and live in it long enough to see its worth increase. There is always then the fall back that if you are in need of money you can sell your home to release the equity.

Once you are on the property ladder you can then work your way up it, paying off your mortgage if you have one, and getting bigger properties if that is what you are after. You could then sell up and downsize to a smaller property when you retire, releasing money that you can enjoy.

Increase your mortgage contributions

Increasing your mortgage contributions, if you have one, is something worth thinking about in your thirties. You may have settled in to your home and likewise be more settled in your finances. If this means you have a little more disposable income than you first thought then maybe consider paying off a bit more of your mortgage each month voluntarily. You can set up a direct debit, or make one off payments to your lender, all of which will chip away at what you owe. Why bother? The more you pay off now, the sooner your will be mortgage free, freeing up a huge payment each month that you can set aside for retirement.

Pay off your debts

You may have amassed debts in your twenties, either on credit cards or loans, or through finance when buying items like appliances or a car. Now is the time to sift through what you have to pay off. You can consolidate your debt by moving the debt around if possible. This way you can pay the lowest interest rates available. You should also look to pay off the debt with the highest interest rates - the sooner this is gone the less you will be paying for it.

To help you manage what you owe consider a balance transfer credit card to bring any credit card or loan debt together. Such a move could save you on late payment fees and high interest rates, allowing you to pay off more of the actual debt.

Need more help? Have a look here at the best ways to manage your debt.

Plan Plan Plan

If you have reached your thirties and never taken the time to look carefully over your monthly finances it is time to start! Budgeting effectively is really the only way to make sure that what goes out is covered by what you have coming in. It helps to ensure you control over your money and shows you where you can make change should you need more money. Start simply with a spreadsheet of what you make and a list of what goes out of your account over the course of a month. If you want a bit more structure to your plans there are plenty of apps you can download to help you manage the figures.

If you need to extra help start managing your money? We've launched a 4 week money course where you'll receive a series of straight-talking, no nonsense tips & tools to help you breeze through the basics.

You'll get a great forward plan to help keep you on track with your budgeting and spending.

It will also give you free links to top tools & tips plus free access to a comprehensive credit report. To sign up, click here.

Top Takeaway

In your twenties…

Make savings now! The sooner you start the more you can save

Manage your pension. Do this properly now and you will build a good fund for retirement.

Ask for a pay rise if you feel you deserve one. The more you earn now, the more you will put away in your pension.


In your thirties…

Start taking property more seriously. If you are renting, could you be looking to buy? Having a property is a great way to put money away ready for retirement.

Pay off your debts – get rid of any debts that are hanging over you and holding your finances back, or manage them so that you have an endpoint in sight.

Start budgeting – with a plan for your monthly finances you are in a better position to control your money and make changes if necessary.


By Jenn Taft

Jenn is a freelance writer and physics teacher from the West Midlands. She has a love of writing about personal finances, especially how they change when you become a parent, and enjoys the honesty that such writing brings. When not writing, teaching or being a mum, Jenn loves nothing more than indulging her love of hospital and police based documentaries, and cake. ?


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