Retirement planning tips
When it comes to planning for life after work, there is no set path that will pave the way to a successful retirement.
This is partly because the key to a successful retirement is much more than having enough money, as explained in this video.
A good starting point is to understand the truth about money and spend money in line with your values rather than on ‘shiny’ things; those that are high on short-term pleasure, but low on long-term fulfilment.
Like most things in life, successful retirement planning comes down to discipline and patience: the discipline to establish simple but important practices and the patience to wait for the results.
Take pension or ISA investing for example: smaller contributions made regularly over the long term (ten plus years) are more likely to provide a greater return that a larger sum made closer to the point of retirement. This is due to the power of compound interest and of the re-investment of income generated within a portfolio.
Other retirement planning tips are to:
- Start early in your preparation. You might not intend to stop working for another ten years or so but taking the first steps early on gives enough time to make the necessary arrangements.
- This would include making sure you understand how much you currently have and how much is enough. That way, you aren’t facing any nasty surprises when you do decide it’s time to retire.
- For couples, this also means talking to each other so that you have a shared view of retirement.
- Think about what both work and retirement mean to you. What are the benefits and costs of working? What does work provide that you may miss in retirement? How can these elements be replaced? This article may give you some inspiration.
- Keep investment charges as low as possible. The more you pay to third parties, the less that goes into funding your life after work.
- Take an evidence-based approach to investing rather than assuming ‘star’ fund managers will generate higher return.
- Take an appropriate degree of investment risk. As you approach retirement, the effects of a stock market crash on your wealth are harder to recover from. This may lead to less money in retirement or more time working (or both).
- And, of course, if in doubt, take advice from a qualified Independent Financial Planner.
In terms of what not to do, we cover some common retirement planning mistakes on this page.