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It's never too early to start planning for your retirement.
However young you may be it is important to understand the impact of not planning properly for your retirement will have on you and your family. Even if you have just started working , it is essential to start thinking about making regular contributions to set you up for the future.
Are you living and working abroad? Are you planning for your retirements?
Unlike regular savings vehicles, investing large amounts of capital is about timing.
The earlier you start to contribute to your pension, the more opportunity you will have to secure yourself that dream retirement.
For those starting out , their retirement outlook may look bleak. They could be facing an uncertain future if they do not take the needed steps to secure a sizeable personal pension. As a result of the global downturn, many pension schemes have huge deficits, meaning that several companies are closing final salary schemes and even the majority of existing schemes have major solvency issues.
It pays to start thinking about your retirement options as soon as possible to ensure that you have enough to live on when you start drawing your pension. For example, if a 25-year-old and a 35-year-old started saving towards retirement, to retire at 55, the 25-year-old could invest £300 a month. As for the 35-year-old to create the same return, they would have to save £803 a month. You may feel that your retirement is a long way off and that you don’t need to think about it just yet. However, if you look at your pension in terms of how many pay-days remain until your retirement at 55, you will notice that there is not long to save an adequate amount.
| Age at starting | Term of Investment | Monthly contributions | Total contributions | Cost of Delay | Estimated fund at net return of 5% |
|---|---|---|---|---|---|
| 30 | 30 | $1,700 | $612,000 | – | $1,000,000 |
| 31 | 29 | $1,800 | $626,400 | $14,400 | $1,000,000 |
| 40 | 20 | $3,000 | $720,000 | – | $1,000,000 |
| 41 | 19 | $3,300 | $752,400 | $32,400 | $1,000,000 |
| 50 | 10 | $7,500 | $900,000 | – | $1,000,000 |
| 51 | 9 | $9,000 | $972,000 | $72,000 | $1,000,000 |
*figures above are for illustrative purposes only.
According to recent figures, individuals aged between 25 and 44 are saving about one third of the amount that they should be in order to support their current lifestyle in retirement. In countries other than the UK, individuals are forced to make sure that their pension provisions will meet their needs to live comfortably.
A good offshore retirement plan should allow you to do the following:
To make sure that your pension covers you for your retirement lifestyle it would be beneficial to seek an adviser who specialises in retirement planning. You must explore all avenues available so that you can live comfortably in your retirement years.
If you continue to pay your contributions towards your state pension and decide to move abroad, then it could prove problematic when investing for your retirement.
You can continue to pay class 2/3 contributions to the UK state pension scheme, but your final entitlement will almost certainly not sustain you a luxury lifestyle in your retirement years. Another issue is that the age of retirement for state pensions will be rising in the coming years, meaning that you will have to work over the current 65 year-old threshold.
On the other hand, if you do not continue to pay contributions into your UK state pension (since you don’t have to if you move abroad), then this could potentially reduce your entitlement completely. This would mean that you would have to start saving towards your pension through other means if you have not been investing already.
In order to overcome these problems with state pensions, you will need to start saving or investing towards your retirement as early as possible.
It is a harsh fact to face up to but, an increasing number of marriages will end in divorce and anyone who have not planned for their retirement could end up with nothing to live on. So do you rely on your partner to support you through your retirement years, or will you start saving and investing in your pension fund for yourself?
Only between 20-40% of people feel that they receive an adequate pension when they retire. Therefore, many are approaching retirement without any financial security measures in place leaving them open to potential hardship should their marriage end. Additionally, since inequality of woman’s earnings has been recently highlighted, this automatically means they will have lower pension benefits.
Did you know that around 50% of working women do not have a company pension plan? And they are less likely than a man to receive an adequately equal pension.
So, what can you do to ensure that you are financially secure when you retire? Start planning your pension while you are young and begin investing as much as you can each month into your future fund. Although your spouse will more than likely have a larger pension fund to retire on than you, at least you have prepared for the worst with your own retirement plan. Above all, your retirement could be more luxurious than anticipated.
A man who retires at age 65 has around 19 years in retirement on average. A female at age 65 has around 22 years in retirement. This means that you could potentially spend 25% to 30% of your life in retirement and will therefore need a substantial fund to support yourself.
A SIPP is a personal pension plan which is suited to the more sophisticated pension investor. There are very few restrictions on what is available to invest your money in, meaning that you will have complete control over your funds. With a SIPP plan, you can invest in most funds, listed shares or commercial property, both in the UK and internationally. All assets within a SIPP fund benefit from IHT mitigation but can be subject to the death benefit charge of 55% on death.
Investing within a SIPP can have great benefits for those who regularly pay into the fund, including:
• Individuals can benefit from full tax relief on contributions based on an annual income of £50,000 2012/2013) if they have relevant UK earnings.
• No need to purchase an annuity— the quasi-compulsion to purchase an annuity has been abolished.
• Before taking benefits, the fund can be made available to your beneficiaries free of the death tax charge should you die.
• If you retire abroad, you can move your SIPP to another jurisdiction using a QROPS scheme.
• Having a wide choice of investment options available to you creating greater flexibility.
• If you wish to choose early retirement, this can happen irrespectively of whether you remain at work or not.
• You may also benefit from staggered or phased retirement.
Though researching and investing in pension schemes yourself may seem like the best idea, sometimes it is just not practical especially if you are new to investing. You must also consider whether you will have the time and patience to make important decisions about your future.
Retirement planning is essential, as is gaining valuable advice that will set you up for your retirement years. Help yourself by finding the right pension solutions for your circumstances.
As most companies here in Vietnam do not include retirement benefits, it is important to not fall behind on your planning. I help my clients take positive steps towards achieving their retirement goals. So, don’t leave it too late, get in touch today and take the first step.