Planning for retirement is often seen as a boring subject, especially if you are currently in your 20s. However, making sure you have enough money in retirement is down to you now. Long gone are the days of final salary pension and you now have to wait longer to qualify for the state pension.
The end goal of a pension is to make you richer when in retirement, so this should be an incentive for you to be proactive. However, we know life can get in the way which means this is easier said than done. Other things can get in the way such as paying off a student loan, getting on the property ladder or even starting a family.
Planning for retirement in your 20s
The good news is that if you are in your 20s and working, and earning at least £10,000 per year, your company will automatically enrol you in their company pension.
You will be required to pay in at least 5% and your Employer 3% of your qualifying salary.
What should you do?
Set goals for retirement. We know that retirement could be more than four decades away but having a general idea of when you would like to retire and the type of lifestyle you hope to achieve can give you an idea of what you need to save.
Join your company pension scheme. We would certainly advise you to join your company scheme and take the time to understand your contributions.
Sort out any debts. You might have debts such as student loans or credit card debt that should be paid off.
If you are self-employed then think about setting up a private pension.
Calculate if you are saving enough each month. The good news is if you start saving when you are younger then your contribution each month can be less to meet your goal.
“We always remind our younger clients that the minimum contribution levels under auto-enrolment are unlikely to be enough to maintain their lifestyle, so additional savings should also be considered to run alongside your pension pot,”
Stuart Belcher, Co-Founder of Resolve Financial Solutions.
Once you have set up your pension, then we would always remind our clients to not forget about it. Keeping an eye on your pension, how it is performing, and how it aligns with your goals is very important. When you are in your 20s, you are more likely to change jobs more regularly which can lead to you having a number of different pensions that you need to keep track of. Consolidating pensions is a solution to this and can make it much easier to track the performance of your pension if it is all in one place.
Please remember that you are not alone when it comes to making decisions about your financial wellbeing.
At Resolve Financial Solutions, we love taking the time to listen to our clients’ retirement plans and helping to make them a reality. We focus on cash flow modelling to give you a clear picture of the retirement lifestyle you can expect. Get in touch today to discuss how we can assist your future plans.
Please note: A pension is a long-term investment not normally accessible until 55. The value of your investment (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.