One of the most important decisions you will ever make is planning for your retirement, as this will affect how you spend your golden years. Having additional retirement funds available will ease economic challenges and give you more financial security at retirement.

At what age will you have a retirement plan in place?

According to a recent survey by Morning Consult, only 40 per cent of people started saving for retirement in their 20s, 25 per cent started in their 30s, and another 25 per cent started in their forties. Only 10 per cent started before they were 20.

At what age did you start saving for retirement?

Many young professionals need help with mortgage debt, student debt, costs of raising children and many other day-to-day expenses, which could put them off saving for retirement year after year as it seems very far away. However, fast forward a few years, and you could find yourself in your late thirties with no retirement plan or savings account. 

Company pension plans are on a downward slope.

In many countries, company pension funds are not compulsory, especially with employees starting new jobs on average every seven years. An employer that offers pensions usually provides defined contribution pensions (what you contribute is what you get out; there are no benefits or a guaranteed income) that pay a once-off lump sum at retirement to be reinvested by the pensioner. The company has no responsibility towards employees after retirement. These defined contribution company pension schemes tend to be generic in their investment and are often passively managed, offering average or meagre returns and not always tax efficient.

Only around 4 per cent of companies still offer a defined benefits pension.

Facing the fact that workplace pensions are not what they used to be, it is vital that you meet with a financial advisor to ensure that you have a comprehensive retirement plan in place that includes your workplace pension, private pensions, investments, and state pension.

What are supplemental retirement savings?

The primary source of retirement savings is usually a tax-efficient, regular contribution company or private pension. Additional savings vehicles used to add to or supplement your primary retirement savings could be, for example, a savings account, investment account, inheritance, or even a rental property. Anything that will generate extra income benefits during retirement. This serves as an insurance policy against unforeseen expenses or economic challenges in the future.

Types of Supplemental Retirement Savings Solutions

Adding extra savings to your retirement plans can significantly boost your retirement income or provide you with surplus money for retirement savings, retirement luxuries or unforeseen expenses.

• State pension – Your state pension should be considered a supplemental income when you retire and not a primary source of income. This could help afford a better lifestyle or be used to pay for unforeseen expenses, as a savings fund, or even vacations.

Some speculate that many governments will not be able to pay pensions in the future and that state pensions might fall away. State pensions are reliant on national insurance contributions, and currently, because of a growing ageing population, there is more being paid out to pensioners than received from NI contributions. This is unsustainable, which is why many governments are increasing the legal pension age.

• Private pension or IRA – This is an excellent way to boost your retirement pension. People change jobs several times in their careers, and company employee pension schemes change frequently. A private pension, or IRA, is the one consistent retirement saving that can span the entirety of your working life until retirement age.
• Regular Contributions Investments – Investing in diversified funds and stocks is a good supplementary source for retirement. It can boost your retirement capital or be used for significant expenses when you retire, without eating into your retirement savings, e.g. a roof repair, renovations, or that around-the-world cruise. Examples could be an IRA, savings account or diversified investment fund.
• Lump sum investments – A once-off lump sum investment can significantly boost your retirement funds as it will earn more compound interest over time than regular contributions. It could even be used to fund the cost of living if you want to retire early while your primary retirement income is deferred.
• Bonuses – A large bonus is the same as a lump sum investment. It can significantly boost your retirement or take some strain off your retirement plans.
• Inheritance – An inheritance is a welcome boost for retirement. It can help you reach your retirement goals quicker and be a safety net for unforeseen circumstances when you retire. It goes a long way to give you financial security and peace of mind at retirement. 
• Rental property – Probably the most significant supplemental income source at retirement is rent from a new property. This will increase your overall retirement assets and be a passive income that can boost your annual income or be saved in a savings account as a safety net. The benefits far outweigh the disadvantages.

No matter what supplemental retirement savings solution you choose, ensure that it is managed as tax-efficiently as possible. Supplementing your retirement plans should be a priority as you never know what the future holds, and extra capital will always come in handy. The benefits are endless.

Fintech investment apps

deVere offers many online solutions to help supplement your retirement savings. These include the Catalyst savings app and deVere Crypto. 

• Catalyst – Catalyst from deVere, is a modern investment product that helps you build a diversified, low-cost & long-term portfolio. It is simple and easy to use. Catalyst allows you to invest in diversified dVAM funds at lower costs. No regular savings are required. You can invest whenever you have extra money available. You choose the fund, and the Catalyst app does the rest. 
• deVere Crypto – This app allows you to buy, sell, store and exchange cryptocurrency. This alternative investment lets you use digital currency and build a crypto portfolio.

Your deVere advisor can help you find tax-efficient retirement supplement solutions that suit your current lifestyle and pocket.

 

Please note the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken as a result of reading the above