The best way to save for retirement in your 50s is a slightly loaded statement. It presumes or insinuates that there is 1 or maybe 2 best ways and that the best way is the best way for everyone.
There are many ways to save for retirement, with some better than others depending on your circumstances and what you’re trying to achieve.
Some have access advantages, some have tax advantages, but all require you to take action asap.
Table of Contents
What do you want life to look like?
At least 4 big questions need to be answered before figuring out the best way to save for retirement in your 50s.
- What sort of lifestyle do you want to lead in retirement?
- How much do you think that is going to cost?
- When do you want to retire?
- How much do you already have?
These questions will help you figure out where you are trying to get to, where you are now, and the gap.
Understanding and being clear about what a good life looks like to you will help keep you heading in the direction you want and avoid expensive distractions or mistakes.
Remember, it’s your retirement, so you should plan to do what you want to do. Not what might be traditional, what your neighbour is doing or what others think you should be doing.
Figure out what you will live off
If you were to play a word association game with retirement, the next word you would probably hear would be a pension.
A pension has been the all-encompassing word to mean a pot of savings to use for your lifestyle when you are no longer working or earning a wage.
However, nowadays, you might hear people say things like my business, house, or rental properties are my pension.
As Robert Kiyosaki said, “The rich don’t get rich by working; they get rich by creating assets.”
So there are a few options other than a traditional pension creating assets being a key consideration.
State pension income
So the traditional way to save for your retirement is through your taxes and the state pension.
Once you reach 65 (67 depending on your age now), you will get approximately for the new state pension, the full rate currently stands at £175.20 per week, but this will increase in 2021/22 to £179.60.
This figure depends on the number of qualifying years you have, i.e. the number of years you have paid tax. You need at least 10 qualifying years to get any state pension and 35 to get the full state pension as detailed above.
Does £179.60 a week or £9,339 a year sound enough for the lifestyle you want?
You can find out your state pension forecast here
If not, then you might need to think about supplementing it with income from other sources.
Work placed pensions are the 2nd most likely income source in retirement and one of the great ways to save for retirement.
Your employer collects pension payments over the time you work there with you, adding your contribution also to add up to your workplace pension.
The key with a workplace pension is to remember the free money, free money and free money offer that’s available.
- Free money from your employer as a contribution to your pension
- Free money in the fact that you won’t be paying tax on your pension contributions
- Free money in that the funds should grow over the long term as the investment grow.
The savings on tax & national insurance can make workplace pensions a very efficient way to build up your retirement savings.
The trade-off with a workplace pension is that you won’t be able to get your hands on it until 10 years before the official state retirement aid.
You may well have collected a number of those through your work years, now seems a good time to make sure you have all the details to hand.
Sometimes people opt out of pensions, thinking that it is taking money away from them. Apart from losing FREE MONEY, you have not lost the money it is being stored up to spend later on.
A pension is stored money/energy waiting to be released when you reach the right age.
It may well be all you have to live off when you get old!
You can, of course, also set up your own private pension through a number of providers.
Here you will also get tax relief, i.e. some of your tax will be paid back to you, but it’s unlikely to be as tax-efficient as your workplace pension.
In a private pension, you might well have more flexibility about where and what the money is invested in. This was you can play a more active role in managing your money if that’s what you want to do.
Again, you will have to wait until 10 years before the state pension age to get your hands on your money.
You can, of course, have money outside a pension.
If you want to retire early, you might well need money outside a private or workplace pension so that you can get your hands on it sooner.
If you get your hands on it sooner, make sure you have the temperament not to burn through it all too quickly.
ISA’s or Individual savings account is another way to save with tax efficiency in mind, i.e. avoiding paying tax on your money’s growth.
ISA’s come in two primary flavours, cash and stocks and shares.
There is now what’s called an innovative finance ISA that allows you to invest in Peer to Peer lending, meaning you are lending your money to other people – hoping they will pay it back with interest.
If you have some form of rental property, this could be part of your pension savings and later retirement income.
Rental properties can provide regular income that increases with inflation over time.
You have the hassles of tenants and being a landlord depending on how you manage the property, i.e. yourself or through an agency.
And, of course, you could sell the property at some stage to add to your pension funds.
IF you have a business, this could be part of your pension income in retirement.
Depending on the business’s nature, it could keep providing you with an income well into retirement or, as with property, be sold to provide you with a lump sum to live off.
An ideal position would be to have a business you never need to retire from, where you can adjust your workload to suit your circumstances bringing in the income for as long as possible.
If you were to create the style of business that you enjoyed, you might never need to give it up, i.e. because you hate it or become challenging to do it as you have gotten older.
Side hustle income
This is where a side hustle might come in that could turn into a business with time.
Here you might be using your skills, experience, or hobbies to create another income source, savings or retirement savings (pension).
Creating a side hustle over time might allow you to pivot away from the day job into something you find more appealing or lucrative.
In the Ikigai framework, could you build a side hustle that:
- Something you were skilled at
- You enjoyed
- The world needed
- And something people would pay you for.
This side hustle may be connected to your previous work in the form of coaching or consultancies in the same field.
Maybe you could start a blog about your favourite topic and sell coaching or information products to help other people who would like to learn about what you have learnt.
Youtube videos, podcasts or self-publishing Kindle books could be a way to use your creative skills to create small but growing income sources.
Yes, maybe you couldn’t do this tomorrow, but over time it may be a way to diversify your pension savings and income.,
In this way, you would be creating assets that would pay you an income to save for and or live off in retirement.
Working part-time into retirement
And almost finally, you could, of course, continue to work into your retirement but on a part-time basis. You are keeping your income and pension contributions going as you work a little or a lot less than you used to.
This may help to keep you busy, active and socialising while also giving you more time to do the things you have always wanted to in retirement.
Woking into later life may also mean you need to draw on your pension pot less as you still have a source of employed income.
I am not sure where the quote comes from, but it goes something like – when you have not got much to do, death will soon come to find you.
Is it worth starting a pension at 50?
I am not sure if this question is asking if it is worth saving for retirement at 50.
It’s likely Yes is the answer, depending on your circumstances because it’s likely to mean more money for you in retirement – what other option do you have? – will not saving make your retirement any better?
I guess that questions are about what vehicle you use to save for retirement savings and spending.
You potentially have 17 years of saving, investing, and compounding your money before getting your state pension. That sounds like a reasonable amount of time to grow your savings for a more comfortable retirement.
From the above, you can see there are a few ways to save for retirement. The best way to save for retirement in your 50s UK depends on your current and hoped-for future lifestyle.
Start saving now so that you have something to live off when you can’t or don’t wont to work anymore for money.
Summary Best way to save for retirement in your 50s UK
- What will your ideal life cost – figure out what good looks like. Only you know this.
- What will you live off – where will the money come from to pay for it all
- State pension – your taxes have been saved up
- Workplace pensions – all those jobs you have had should have been saving for you into a pension
- Private pensions – maybe you have set up your own pensions to help build up some savings
- Non-pension savings – cash and other investment will come into the pot to help you live through retirement.
- Property income – if you have one or more rentals, these could give you a regular increasing income as well as a lump sum if and when sold.
- Business income – if you own a business, this will be brining an income in and could be sold off at the right time to provide a lump sum to live off.
- Side hustle income – creating your own job or assets could well provide an ongoing income for you into retirement using the skills, experiences or hobbies you have built up over the years.
- Working part-time – You could, of course, keep working in a part-time capacity if that was possible well into retirement, giving you an income and stretching out your savings further.
- Is it worth it at 50? Yes, it probably is – would it be better not to save anything for your retirement? I think not; you have to find the right way for you.
Anyway, those are my thoughts on the Best way to save for retirement in your 50s UK; let me know yours in the comments below.
Good luck out there.
Are you tired of living paycheque to paycheque? Never able to save? Sick of being in debt? Have no retirement savings? Best way to save for retirement in your 50s UK?
Are you confused about money and all the financial options out there? Feel like you will never be able to save enough for a house, career change or retirement?
Would you like to?
- Be Debt-free
- Be confident in your money management skills and choices.
- Never have to worry about money again.
- Be building towards your most important goals – like making work optional one day!
- Build a plan to create wealth in every area of your life?
Let us help you make the most of your money now while building a financially free future.
Our financial coaching will give you the support, guidance, and accountability you need to succeed with money.
Start building your ideal life now because waiting will only make it more expensive and painful to achieve.
Plan, build and enjoy your money.
Taking you from crisis to financial happiness.
Contact us here for a free chat about Financial planning for 40 year olds and what options you might have for creating wealth in every area of your life.