Are you saving for retirement? As women, it’s easy to feel that we are locked in a constant financial battle. If you’ve read the personal finance sections of some of the Sunday newspapers recently, you may have noticed we have yet another problem: we’re not saving enough for retirement.
If you’ve read the personal finance sections of some of the Sunday newspapers recently, you may have noticed we have yet another problem: we’re not saving enough for retirement.
It is true that none of us are saving enough for retirement. The worrying thing about this most recent piece of news, is that, when it comes to pensions, us girls are doing so much worse than the boys.
According to Mercer, men’s retirement funds are three times the size of ours. THREE TIMES. One paper aptly called this problem: “the other Gender Pay Gap.” And it’s more than twice the size of the gender pay gap we experience at work.
The great news is, as a reader of Money Nuggets, you’ve got a head start. Just being here shows that you understand the need to be sensible with money. And you probably understand what a fantastic opportunity our retirement can offer.
But what can you do to make sure you are making real headway with your pension pot?
Will you manage to secure enough money to live your dream life in retirement? Read on for some great tips to help turn your savings into a pension pot of gold.
Saving for Retirement: Top Tips to Boost Your Pension Pot
This is the least talked about aspect of retirement planning but it is actually the most important. Ask yourself: What do you want for your future?
Will you travel? Keep working? See family? Drink wine? Learn something new? All of the above?
Understanding what you want from life helps you understand the purpose of your saving and gives you a goal to work towards. Which not only quantifies the size of the challenge but will also help maintain your motivation when things get difficult.
2. Start Now
As the Chinese proverb goes:
“The best time to plant a tree was twenty years ago. The second-best day is today”
The sooner you begin saving for retirement, the easier it will be. Not only does it create a lifelong money habit that you can build on, it also gives you longer to benefit from the impact of ‘compounding’, i.e. the effect of earning interest on interest.
If you haven’t started already, start now. Check out our handy guide for more information on compound interest.
3. Little and Often
When it comes to saving for retirement, it doesn’t matter how little or how much money you have spare, get into the habit of putting an amount away regularly.
Increase that amount each and every time you get a pay rise (before you get the chance to spend it).
You’ll be surprised how little you miss small amounts. And how quickly the money builds up. Which in itself becomes motivation to do even more.
Of course, as women we take more career breaks than men. Which affects our earning power.
However, even when you are not working, if you have the means, be aware that you can still contribute to a pension – up to £3,600 a year.
Related: The Pension Penalty for Motherhood
4. Don’t be Greedy
There is many a sorry tale on the Internet, of very rich people getting into financial trouble by trying to make even more money. Recent victims include a Wimbledon winner’s £100 million fortune, driven partly by Nigerian Oil.
In the words of business magnate Warren Buffet: “Never buy what you don’t understand.” And if the investment looks too good to be true, it probably is.
5. Review What You Have. Often.
Shockingly, insurance provider Aegon has found that 42% of women have never reviewed or acted on their plans for retirement. More than a quarter suggest they don’t understand the information they are given.
Which is not surprising really. Pension providers are certainly not known for their clear communications.
The problem is, if you don’t review what you have, it can quickly go backwards.
In my work, I regularly come across pensions funds and investment products that have been set up but then left untouched for 20, perhaps even 30 years.
Which (sadly) means the money locked up in those products has missed out on the current trends towards lower fees and greater investment scrutiny.
And some of what could have been working towards the owner’s retirement has instead been lost to fees that will now be supporting someone else’s.
Checking the performance of funds, assessing the fees and maximizing the potential for your investments is really easy to organise and could significantly improve the outlook for growth on that money.
6. Make Sure You Are ‘Auto-Enrolled’
If you are employed, chances are you are either in, or are about to become part of a workplace pension scheme.
Take up the offer. Do not opt out.
By 2019, your employer will be contributing 3% of your income to a pension, you will be contributing 4% and the Government will be topping up with another 1%, making 8% in total.
In other words, for every £1 you save, you get £2 actually invested. Double your money. For zero additional effort.
Now that’s an offer that sounds too good, but is actually true.
Remember: Auto Enrolment contributions are subject to certain limits. If you are unsure of the details or would like to check if you qualify, visit the Money Advice Service.
Over to you!
How healthy is your pension pot? Have you started saving for retirement? Share your top pension tips with us here; we’d love to hear from you.
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