How to quadruple your retirement savings!
If I could share a secret, which would show you how you could double or maybe quadruple your retirement savings, you’d be interested right? Read on…
Quadruple Your Retirement Savings?
The HSBC global retirement survey “The Future of Retirement – A New Reality” show that on average, people who have a plan for retirement not only save more but also save more regularly, resulting in them having over three times the average value of retirement savings compared with those who don’t have a plan in place.
- It’s our habits that make us and our habits that break us, regular savings builds good habits and financial security over time.
- Taking it a step further, when looking at the total value of retirement savings, a similar picture emerges: on average, people who work with a Financial Planner have over four times more retirement savings than those going it alone.
- Regular and consistent savings is important and forms Step 5 in my 5-Step program to financial independence, but before you jump ahead and start saving for your retirement, you need to get your house in order.
- There’s no point setting off on a journey if you don’t know where you want to go! Follow The Money Plan 5-Step Program to significantly increase your chances of success and fulfilment.
The Money Plan 5-Steps
Step 1 – Know what it is you want, be clear and commit your compelling future to paper!
Step 2 – Get organised, know what you have coming in, going out, what you owe and what you own
Step 3 – Build your House of Wealth, review your financial foundation and get protected!
Step 4 – Repay your expensive, unsecured debt, fast!
Step 5 – Fund your retirement savings
It’s important to start with a solid financial foundation first, don’t just jump into the pool, you don’t know how deep it is! Follow the steps in order.
Investing for retirement – Step 5 in more detail
Once you’ve covered steps 1 to 4, and your unsecured debt is cleared I recommend you allocate your Snowball, which needs to be at least 12.5% of your gross income towards your long-term financial success.
I define your Snowball in The Money Plan as being the surplus income you have each month after all your Bills account and WAM payments have been made, check out my video covering it. As a minimum, your Snowball should be 12.5% of your gross monthly income. Why 12.5% you may ask? Because I want you to ensure you pay yourself first, the first hour of each working day!
- If you have secured debt such as a mortgage, use the 40/40/20 rule to allocate your Snowball; 40% to overpay on your mortgage, 40% allocated to your pension and 20% allocated to your fun bucket
- If you have repaid your mortgage and you are debt free, you need to assess if you are on track for retirement, or not;
- If you’re on track you should allocate your Snowball; 60% towards your retirement and 40% allocated to your fun bucket.
- If you’re playing catch up, like so many people, and your current retirement savings are low, or you have left it late to start savings, you should take the 40% of your Snowball which would have been allocated towards your debt and switch this to retirement savings so you’ll have 80% of your Snowball allocated for retirement savings and 20% of your Snowball allocated to your fun bucket.
- It’s important for long-term financial success you always retain a proportion of your Snowball towards your fun bucket. The Money Plan is a proven financial plan for life, not a get rich quick scheme, or a quick fad diet – we know excluding all treats from your diet indefinitely doesn’t work long term and isn’t fun – follow my allocations above for a successful experience.
- If you’re ready to start your retirement savings your first visit should be to your employers’ Workplace pension, ask if you can increase your savings to this scheme and ask for the payments to be deducted at source – which means taken out before your tax is calculated.
- If this is not possible for you, go and check out www.Lexo.co.uk a site I built specifically for people like you, it uses low cost, evidence-based investment funds which I use with my clients at Lexington Wealth and stacks the probability of a successful investment experience in your favour.
For most, you should be funding a private pension plan as your first priority (via your employer as a preference). Once this is fully funded, then check look to invest in an Investment Individual Savings Accounts or ISA.
Your pension payment may not sound like much to start with, but if you don’t follow through on this step, you won’t have any savings to make decisions about in the future.
Your goal is to prioritise your retirement over helping your kids buy a car, buy a home or even their education! There’s a 100% chance, health permitting, that you will retire, there a probability your child won’t graduate!
Your goal is to consistently, over time, invest for your retirement, once this step is covered and your retirement plan is on track you can look to help others. Failing to secure your own retirement may make you a liability to them down the road.
Plan your Retirement
Calculate what your retirement savings will look like when you stop working, projecting your contributions and the investment returns to a future retirement date.
Ideally, you should be able to live off the growth of your retirement savings rather than depleting your nest egg, but for some this just won’t be practical and you’ll either need to purchase an annuity for some or all of your retirement income, or you will draw down on the capital which is a higher risk strategy. I definitely recommend you work with a professional Certified Financial Planner (CFP) if you plan to do this. You can find a Certified Financial Planner by using the Wayfinder website.
A CFP can help you with inflation, taxes and understand the fees associated with retirement planning.
There’s Power in a Retirement Plan
While there is no guarantee that a retirement plan will make you a millionaire or give you a perpetually rosy outlook, it certainly won’t hurt your chances for a confident future!
Whichever path you take, enjoy the journey, and live your life on purpose.