No matter what is going on with the wider economy, it’s essential that you maintain a savings habit. Choices you make now not only need to account for what your current situation is but should also take into account where you want your finances to be in the long run. Learn why it’s so important to keep up pension contributions even in the current climate.
This does not constitute advice and advice should be sought in all instances before acting on it.
It can’t be overstated what the impact of any breaks in pension contributions could mean long term. You could end up with thousands of pounds less in the end, which could have a significant effect on your retirement income.
Recent research from Standard Life highlighted that reducing or stopping pension contributions altogether, even for a short time, means your retirement will be affected.
What seems small could have a big effect
Let’s break down a possible number scenario. If your salary just starting out in your career at 22 was £25,000 per year, if you paid the standard contribution for monthly auto-enrolment contributions of 3% for employers and 5% from yourself, the employee) then your total retirement income by the age of 68 would be £456,893.
This is based on continual contributions. If you were to stop contributing even for just one year, your pension pot would end up almost £13,000 less, totalling £444,129 instead. Freezing contributions for even longer would result in an even bigger impact.
Sorting out your priorities
If you are further along in your career, chances are that dipping into your savings to pay for everyday expenses isn’t your primary concern. Rather, with the current cost of living crisis, many fear that with prices rising so quickly, they won’t be able to keep up their current level of contributions. Almost all of the survey respondents (93%) cited increased costs as the reason for cutting back on unnecessary spending and shopping around for the best deals on purchases. If saving is your priority, it’s an easy choice to cut back temporarily on luxuries or superfluous spending now so your future isn’t compromised.
Review your spending habits to identify places to cut back. Do you have any subscriptions or memberships that you no longer use and could cancel or pause? Are you eating out a lot? Switch to a bigger weekly shop to save money on takeaways. Set a budget and stick to it!
Professional help with your finances
At Dental & Medical Financial Services, we understand the importance of achieving your desired financial future. If you would like to build your new retirement savings plan or review your existing plan, get in contact with us today. We’ll help you build a financial plan that will ensure you’re working towards securing a stable and prosperous financial future.