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Sep 21

What to consider when planning retirement income strategies

Posted by at 17:13 | Default | Comments(0) | Reads(675)

Retirement income strategies may seem like something that can be put onto the backburner because it’s a long way away. However, time flies by, and before you know it, you may not have enough of a nest egg to support your lifestyle.
Official figures from the government show that around 12 million people are not saving enough for the future.
Thanks to recent reforms, such as the auto-enrolment of employees on a pension scheme and new pension freedoms for those aged over 55, many people are starting to think about retirement income strategies earlier in life.

When is the best time to start saving?
When it comes to your retirement, the earlier you start saving, the better.
Before the auto-enrolment of employees, many people didn’t start saving until they were in their late 30s or even their 40s. However, new reforms have helped to highlight the importance of saving and investing for a retirement fund. The concept is simple; the earlier you save, the more money you will have stashed away for your retirement.

Watch video and listen to Jerald Solis, Business Development and Acquisitions Director at Experience Invest speak about investing for a retirement income.

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Retirement investment options
When considering retirement income strategies, you should consider the tax implications. After all, tax penalties will eat into your profits.
If you are serious about investing for your future, a financial advisor would be a good place to start.
They will help you decide how much you should invest, how much you should save and can also advise you on any tax implications.
Seek advice from a trustworthy financial advisor and explain how much you would ideally like to have per year for your retirement.

Pension reforms
As of April 2015, savers in the UK were given the flexibility to spend their pension pot as they see fit.
Now anyone with a defined contribution pension – where employer and employee contributions are paid into an individual pot – can access all of their cash at the age of 55.
However, those with a public sector pension (doctors, civil servants etc.), private sector workers with valuable defined pensions, savers with older plans which have an exit fee attached and those who have already bought an annuity will not have the same freedoms.
Those who are able to access their whole pension pot should understand that this great freedom comes with great responsibility.
Savers who opt to take out their whole retirement fund will be subject to tax at their marginal rate. Savers can take out a quarter of their pot tax-free however, extra withdrawals will be added to and individual’s earned income and HMRC will tax this figure accordingly. Savers should be savvy when withdrawing money from their pension pot to ensure they don’t get hit with a hefty tax bill.
“It’s great that people are excited about pensions and seeing the possibilities the new rules create, but they have to open their eyes to the pitfalls too. There’s a tax trap waiting to catch the unwary – take care not to get snared,” Just Retirement group external affairs and customer insight director Stephen Lowe commented.

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Retirement income strategies

Buy-to-let property

The UK’s property market has a proven track record and can provide investors with a regular income. Popular asset classes include student accommodation, residential buy-to-lets and commercial property.
Property investment is a great way to generate an income however, investors should consider the tax implications of their purchase.
A fully managed property investment, like those available through Experience Invest, will provide investors with a passive income from the UK’s property market.

Shares and funds

Although this may seem like an intimidating option, shares and funds are a good income producing option.
If you have a limited knowledge of shares, multi-manager funds offer a wide range of shares, bonds and other income producing options.
Investors can buy into a fund and essentially let their money do the rest.

Saving: ISAs

ISAs provide an alternative way to save tax free. Currently, savers can stash away up to £15,240 per year tax free and receive interest on their funds (albeit a low level of interest depending on the bank).
ISAs are more flexible than saving money in a pension pot and offer a far simpler way to save. This form of saving can provide a hands-off way to put money to one side for your retirement.

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Peer-to-peer lending

A relatively new concept. Peer-to-peer lending allows individuals to lend money directly to those looking for loans. Essentially this type of lending eliminates the role of a bank.
There is an element of risk involved however, it’s not actually that large as you can split your money between numbers of borrowers to minimise risk. Lenders are rewarded with impressive returns.

Zopa, the largest peer-to-peer lending firm, says that no one has yet lost money using their service.
Try to review and reconsider your retirement income strategies regularly. This will enable you to react to any changes to the market and it will help you to secure the best possible returns.


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