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Jan 6

Investment Strategies: How to catch-up when getting close to retirement

Posted by at 11:57 | Default | Comments(32) | Reads(1549)

Retirement is something that can seem a long way in the future when you are young and starting out on your career. You may well have intended to start, but one thing has led to another and you may have found yourself over forty without sufficient savings for your retirement. Thankfully, it is never too late to start; the following tactics will help you to build a reasonable retirement fund:

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Reduce Expenses and/or Increase Income
The most obvious way to build your savings pots is to earn more or spend less. Every penny extra in your hand can be added to your pot and will still benefit from the effect of compound interest. You should use the following principles:
•  Eliminate any debt, this will free funds to save and reduce your outgoings.
•  Automatically send funds to savings account; if you do this when you get paid you will never miss the money.
•  Add raises; any pay rise should be added to your retirement pot. You have managed to live without it before so can afford to live without it in the future.
•  Review your expenses and eliminate anything which you do not really need. The cost of one latte when you are forty can actually equate to a thousand dollars by the time you retire thanks to compound interest.
•  Employment; consider asking for a raise, looking for a new job or taking on a second job. Any of these items should be able to increase your available funds and allow you to direct more to your savings account.
•  Used items, particularly cars, are expensive. It can be extremely beneficial to your finances to purchase second hand items.

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Converting Assets
Having completed stage one you will be redirecting all available funds towards your savings account. However, you can also look at the assets you currently have to assess whether you can convert any of these into additional funds:
•  Your home is probably your biggest asset. It is possible to downsize your home and still live in a comfortable house. If this is an option you should be able to release a sizeable amount of equity and this can all be added to your retirement fund. This is a particularly good technique if you live in an area with high property prices. All your other bills will decrease in-line with your smaller home.
•  Reverse mortgage; this will allow you to secure funds against your home without moving. The funds will be deducted from your estate at the time of your death.  You can use a professional business or you can choose to sell your home to your children and rent it from them.

Use Government Incentives
Your employer may offer a matched savings plan; if they do they are, effectively, giving you free cash. Every contribution you make is matched by them up to a limit. To ensure you make the most of this free money you should contribute as much as you are allowed to.

The government will also assist you with your savings by providing you tax relief on every penny you save in a designated retirement plan.  Again, it is best to save as much as you are allowed to; and can afford. If you are older than fifty five it is also possible to add lump sums into a designated pension plan. This is an extra opportunity to benefit from tax relief and increase the value of your savings. It can be a good option if you have a chunk of money from downsizing and will ensure you get your savings plan back onto track.

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Investing money when you’re about to retire can be incredibly challenging. You can never be too sure that the money you’re about to spend will bring you a good profit. If you’re new to the investment scheme, then you are advised to consult with a financial advisor. Financial software for professionals will help them understand your situation a lot better. It is important to have a budget in mind if you’re thinking to invest, and stay as far away as possible from independent “brokers” claiming that they can make you rich in a matter of months. They’re just scammers eager to rip you off of your pension!

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