Everyone living in the UK entitled to receive a state Pension will do so when they hit the right age, but increased living costs mean that this barely covers the basics. It’s estimated that a single person needs £14,400 a year for a minimum income, yet for retirees who receive the full new state pension, this figure sits at £11,502 for the 2024-25 tax year.
There are different ways to save and manage your finances to ensure a financially comfortable retirement that allows for holidays and other leisure spending, as well as day-to-day needs. Explore some of the best ways to bolster your savings to safeguard your financial future.
Create a budget
Begin by creating a budget that sets out your earnings against your outgoings, splitting your spending into essential costs, leisure activities and savings. One way that could potentially help ensure long-term financial health is to make sure that 20% is going towards savings each month - including an adequate Pension that lasts your lifetime.
Start saving early
You might think that you’re too young to worry about your Pension, but it’s sensible to start saving early. The state Pension age in the UK keeps going up, and if you want to retire earlier you’ll be completely reliant on self-made resources until it kicks in. Practice putting some money aside for savings every month, even if the amount fluctuates depending on your spending needs.
Diversify your investments
One of the top tips for retirement security is to diversify your investments. Diversification means making sure you're not relying on one type of investment too heavily. Any investment can rise or fall in value, however, diversification can help to find a range of investments and a level of risk and return that you’re comfortable with.
Consider chatting to a qualified financial advisor for tailored advice on how to invest your money to get the best results. Options include stocks and shares at a variety of risk levels, bonds, funds, trusts and potentially high-yield fixed-return savings accounts that benefit from compound interest. With investing, your capital is at risk.
Manage debts wisely
While doing your best to make the most of your hard-earned money, remember to manage debts wisely. For example, paying off short term borrowing options like credit cards and loans can help to avoid dangerous debt cycles and protect your credit score.
With long-term borrowing options such as mortgages, it’s fine for your financial health to follow agreed repayment plans – although it may be beneficial to settle your mortgage sooner if the remaining amount is low to reduce your monthly spending and safeguard this important asset.
Plan healthcare expenses
Last but not least, make sure to plan healthcare expenses into your budget. We don’t know what the future holds, but it’s best to be prepared for all eventualities. In the UK we’re fortunate to benefit from a free healthcare service, but this doesn’t always cover the cost of prescriptions. You might also need to pay for specialist advice and treatments from private healthcare companies.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors.
Pension eligibility and tax rules apply.
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