Planning for your retirement, and your financial future in general, is incredibly important. Given the current economic climate and the debt our governments are grappling with, relying solely on a pension isn’t a safe bet. You’re likely going to live longer than your parents did, and you’ll want to enjoy your retirement without the stress of financial worries. Some recent studies have shown that having a million saved for retirement doesn’t stretch as far as it used to. Why? Because typically, you can withdraw around 4% of your savings each year to ensure it lasts until the end of your life. So, a million pounds, considering you have other savings and your mortgage is paid off, would give you an income of about £40,000 a year. Adjusting for inflation over the next 30 years, that’s more like £20,000 in today’s money—not much if you’re dreaming of a retirement filled with golf and cruises.
So, it’s crucial to start planning now. There are three key factors to think about:
1. How much you earn and ways to increase your earnings.
2. How much you spend and how to cut costs.
3. How effectively you invest and the impact of compound interest on long-term growth.
For instance, if you start saving today with an initial £500 and add £100 every month:
– In a regular savings account, you’d have £40,983.
– Through traditional investment channels, you’d have £70,294.
– With a low-cost robo-advisor like Wealthsimple, you’d have £95,771.
Investment returns can vary, but historically, the S&P 500 has offered over 8% annual returns, which is significantly higher than a standard savings account.
Starting to invest is simpler than you might think. No need to delve into economic reports or wake up for market openings in different time zones. Nowadays, algorithms do the hard work. With Wealthsimple, you choose your monthly investment amount and preferred asset allocation—conservative, balanced, or growth-oriented—based on your risk tolerance. A conservative approach might allocate 60% to bonds and the rest to equities. On the other hand, a growth-oriented approach could put only 8% in bonds and 40% in UK and US equities. Higher risk could potentially lead to higher rewards.
First, maximize your stock and shares ISA for tax-free returns. This gives you an immediate return equal to your tax bracket’s value.
Remember, investing is a long-term game. Markets will fluctuate, but with regular, consistent investments over time, you’re more likely to build a substantial retirement fund. As demonstrated, £100 a month can grow to nearly six figures in 30 years.
Wealthsimple is a trusted Canadian company with a solid track record in Canada and the US. You can open an account with no initial deposit, and there are management fees of 0.7% or 0.5% for balances over £100,000. Usually, the first £5,000 is managed for free, but with the provided link, you can get your first £10,000 managed for free for a year.
Your portfolio will be tailored to your financial goals and rebalanced automatically. Dividends are also reinvested to maximize the benefits of compounding.
For those with over £100,000 to invest, additional perks include lower management fees, personalized financial planning, and VIP lounge access at airports.
Sign up for Wealthsimple and get your first £10,000 managed free for a year!
