According to Deloitte, the UK savings gap is expected to reach £350 billion by the year 2050, with investors having to find an average additional amount of £10,000 per annum if they’re to bridge this chasm.
This number is nearly £32 billion more than the firm estimated just five years ago, as the pressure on private and public pensions continues to grow against a strained economic backdrop.
So, there’s an onus on individuals to formulate their own successful savings plans. Here are some ideas to help you on your way:
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Why is Planning so Important?
The above numbers highlight the primary reason why you should start planning for your retirement, as it fundamentally prevents you from running out of cash and resources for the duration of time that follows you leaving gainful employment.
As we can see, the need to plan ahead of time and in greater detail is even more pressing in the current climate, as private and state pension shortfalls continue to spiral year-on-year.
By planning, you can also take control of your financial future and security, as you look to calculate rates of return on your various investments, manage risk in line with your outlook and determine which assets you want to commit to over-time.
What are the Key Savings Plans to Keep in Mind?
With a clear understanding of the importance of financial planning when it comes to your retirement, the next step is to conceive and implement some practical ideas. We’ve outlined three to keep in mind below:
- #1. Plan According to Your Age: This is a key consideration, as your outlook and financial priorities tend to change as you grow older. For example, saving in your 20s enables you to take more risks and pursue higher rates of return (while also being automatically enrolled into a workplace pension plan), whereas older savers will focus more on consolidating their wealth and growing this incrementally through fixed-income products such as bonds.
- #2. Focus on Expenditure as You Approach Retirement: As you approach retirement, you should also consider tracking your expenditure and developing an understanding of how much you’re likely to spend once you’ve ceased to work. After all, while you’re likely to have less money during your retirement, your cost of living should also depreciate, so making such calculations gives you a clear idea of how much you’ll need to enjoy a comfortable retirement.
- #3. Get Professional Help and Guidance: Unless you’re an experienced investor or someone with a knowledge of finance, you may need expert help and financial planning guidance when preparing for retirement. This is especially true if you have a large or complex investment portfolio, as managing and distributing this can be highly challenging and could well require the steady hand of a seasoned wealth manager.