The Government has increased the state pension age meaning that younger generations will have to work longer before claiming a pension.
The changes were announced in the Autumn Statement and will affect nearly everyone in Britain under the age of fifty. The increase in the state pension age means that those currently aged under thirty years old may well be working way into their seventies.
Why has it increased?
With more and more people living well into their nineties, the UK Government has decided that the country simply cannot afford to pay state pensions for more than a third of people’s adult lives. It has meant that young workers either have to work way into their seventies or need to start saving now so they can afford to retire when they are ready to. People that are currently in their twenties should plan for retirement without a state pension and simply see it as a bonus when they eventually receive it.
Saving for retirement
Although you may only be in your twenties, it is worth coming up with a smart retirement plan. You need to keep in mind that you can take income from a personal pension fund from the age of fifty five and that there are many other investment opportunities that can help you retire early.
Once you have settled into your job and have got to a point where you have money left over after you have paid your rent and bills, then try putting the rest into an ISA. The great thing about ISAs is that they offer tax-free returns. You will be able to save a maximum of £11,990 during the next tax year. Half of the money you save can go into a cash account and the rest can be invested in the stock market. When investing in the stock market, try to be realistic about the returns you expect to receive. It is also worth noting that although the money in your ISA can be accessed before retirement, it is best to avoid it if possible.
Workplace pensions play an important role in retirement planning. The advantage of workplace pensions is that they cannot be accessed until you reach the age of fifty five, preventing you from being able to dip into them and splash out on a whim. You will often find that your company matches what you put into your pension. Keep in mind that workplace pensions also qualify for tax relief.
Diversifying your portfolio
Things start to change in your thirties. It is likely that you will want to buy a house and you may even want to get married and start a family. It is in your thirties where you need to start thinking about diversifying your investment portfolio. A great portfolio will be made up of property, stock, ISA savings, a pension and maybe even a business. Although diverse investment portfolios can take years to establish, they do not take as long to plan, so it is worth getting to it! Getting rid of debt as quickly as possible will also benefit you greatly in your aim to retire at a decent age.
It’s never too early to plan
When it comes to retirement planning, it is never too early to start. The more you plan now, the better chance you stand at retiring when you are ready to, the Retirement Secured website has significant information on this topic. Of course you do have to fulfil your plans too, which is often easier said than done! In your twenties it can be difficult thinking so far ahead, so it is definitely worth doing some of your own research, speaking to your parents and arranging an appointment with a financial advisor so you can gain as much knowledge on retirement planning as possible.