Building and maintaining wealth that will last you through retirement is one of the most significant endeavours you can undertake in your lifetime. Pension planning is an integral part of this process, but some people delay it, wrongly thinking they can save all that they need later on in life.
This does not constitute advice and advice should be sought in all instances before acting on it.
Whether delaying saving for retirement is due to poor planning or unrealistic expectations, it’s not something financial experts advise. In fact, the stance financial advisors take when it comes to pension planning is that it’s never too early to start.
Cost of waiting
Some might think that pension saving is something to do once you’re settled in your career and you can prioritise it against all your other financial responsibilities. But many find that when they finally do start planning, it’s not as simple as they thought and once they do have a plan in place, it might be a little bit longer to retire than they hoped for because they waited so long to save.
Often making the minimum contributions suggested through auto-enrolment won’t get you to retirement age with all the money you need, and contributing enough once you finally do decide to start saving might just be unrealistic. It’s more prudent to begin early so you aren’t overwhelmed with the amount of money you need to contribute on a regular basis. Plus, you’ll reap all the benefits of compound interest, increasing your funds even more over the years.
How much do you need?
Generally, one should expect to live for at least 20 years once they retire, so savings goals need to reflect this. Guidelines set out by the government stipulate that a pension should provide at least two thirds of your working salary. It stands to reason that since you will no longer require business attire or be making a daily commute, you won’t really lose the other one third of your income to these expenses.
However, your plan must account for the static income – you can no longer look forward to pay rises or promotions. If cost of living remained the same, this might be fine, but it’s just one more factor to consider while planning.
While it might seem manageable, you must always think about the bigger picture. You’ll need to save at least as much money to allow for a pension income of at least two thirds of what you’re used to for at least 20 years. You should allow as much time as possible for yourself to achieve this because saving the necessary amount on an average earner’s pension contributions might prove difficult. If you compare saving at 50 years old, you’re looking at needing to save almost four times as much as you would need to have saved at 20 years old.
Start saving for your retirement
Whether you dream of travelling the world, taking up new hobbies, or spending more time with your loved ones, your retirement is the time to pursue your ambitions. And in order to live your best life after working, you’ll need a solid financial plan to help get you through those decades.
There’s no time like the present and the earlier you start your savings plan, the better off you will be. Dental & Medical Financial Services can help you create a carefully structured plan, so contact us today.
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Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.