What Are The Best Savings Options For Retirement?


As we are now living longer, it is very important to save up for in order to maintain a comfortable standard of living once you have stopped working.  Things to consider in this case include how much you are likely to need to fulfill your lifestyle when you retire, how long you have been saving and what sort of investment accounts you should use to achieve your goal.  Ideally, the sooner you start saving the better.  Start later and you will have to save a lot more each month to reach the same amount in your retirement pot.  This article focuses on the best long term investment options to fulfill your retirement goals.

-Workplace pension-also known as a company pension, this is a way of saving for your retirement that’s arranged by your employer.  The benefits range from employer to employer but most pensions of this kind contribute between 3%-10% of your annual salary a year.  Of course, you should contribute as much as possible too so that you not only take advantage of tax relief, but to also ensure that you save up enough for when you retire.

-Personal Pension-In addition, many people (myself included) choose to take out a personal pension too, in which you pay a regular monthly amount or a lump sum to a pension provider. The most common one in the UK is the self-invested personal pension (SIPP), where by the government tops up any of your contributions by 20% (you can claim back another 20% if you are a higher tax payer), not to mention all the income and capital gains on your investment being tax free.  In the US, the main types of retirement account are the 401(K) which is funded by pre-tax money and is taxed upon withdrawal (from age 59 onwards). The Roth IRA account on the other hand, is essentially the opposite-funded with after tax money and NOT taxed when you withdraw (which can be anytime).  Think of this as a tax free savings account.

-Individual savings account (ISA)- cash ISAs are tax free in regards to the interest that you earn, whilst stocks and shares ISAs are free from both income tax and capital gains tax (CGT). The UK government has also introduced a new lifetime ISA in which you can save up to £4000 tax free per year, with the government topping up your contribution by an extra 20%.  You can shelter up to £20,000 from tax in an ISA in the 2017/2018 tax year, either in cash or in stocks and shares.

What are you currently doing in terms of your retirement savings plans?

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