How to start saving for retirement

If you’re wondering how to start saving for retirement, the first step is to commit to it – today! The sooner you begin building a retirement nest egg, the better your financial outlook will be when you reach retirement age.

However, we know taking that first step is easier said than done. That much is obvious when you consider there are almost 7 million Brits aged over 50 with no private pension savings, according to research by SunLife.

The UK’s current estimated population is around 67.6 million people. So by those estimates, more than 10% of the population is likely to be largely dependent on the State Pension for their retirement income.

The current full state pension entitlement totals £11,502 per year. That’s some way short of the £14,400 minimum needed to cover a single person’s basic annual costs, according to the Retirement Living Standards.

These standards were devised by the Pensions and Lifetime Savings Association, using independent research by Loughborough University, to help people visualise the kind of lifestyle they could have in retirement.

But it doesn’t need to be this way, and you certainly don’t have to go it alone. Once you’ve conquered that first hurdle, and committed to getting started, Hilltop’s financial advisers help you to take meaningful action.

The first port of call is to develop a retirement savings plan.

What is a retirement savings plan?

A retirement savings plan is the cornerstone of your retirement planning strategy. It’s a living document that evolves with your circumstances and goals, helping you accumulate enough funds to support your retirement.

• What kind of lifestyle do you hope to enjoy?
• Where do you want to live?
• What kind of hobbies and holidays would you like to have?

All these factors combined will influence your retirement savings needs. Your plan should also reflect your attitude to risk. This will ultimately help to determine the asset allocation of your investments.

How long you’ve got until retirement will also impact these investment choices. A longer timeframe enables you to be more aggressive with investments, while a shorter horizon might call for a more conservative approach.

Consider how you’ll convert your retirement savings into income. This might involve lump sum withdrawals, a pension annuity, pension drawdown or a combination of all these methods.

Understanding the tax implications of how you plan to take your retirement income is also key to keeping as much of your savings in your pocket as possible – something Hilltop’s advisers can help you to plan and achieve.

Paying off your mortgage vs saving for retirement

Of course, how you go about executing your retirement savings plan will differ greatly depending on your circumstances. If you’re a homeowner, mortgage repayments will be one of your biggest outgoings.

When you factor in kids, holidays, and other everyday living costs, it can be tricky to find any spare cash to put towards your retirement savings. All of which can make it harder to get started in the first place.

This begs the age-old question: should you prioritise paying off your mortgage or saving for retirement?

A balanced approach is often the best approach. If it makes sense to do so, making overpayments on your mortgage (being mindful of potential charges) can provide a valuable sense of freedom and security.

However, if you neglect your retirement savings to pay off your mortgage, you might miss out on the positive effects of compound interest. Even small but regular savings can accumulate effectively.

Ultimately, the best decision for you will depend on your unique financial situation, risk tolerance, and retirement goals. We recommend speaking with one of our financial advisers to ensure you’re making an informed choice.

Retirement saving options for self-employed workers

Like homeownership, self-employment can also be a barrier to saving for retirement.

With rising debt, uncertain income and a cost of living crisis to contend with, it’s easy to see why a whopping 76% of the 9,000 self-employed workers surveyed by Interactive Investor admitted to paying nothing into a pension.

As a self-employed individual, it becomes your sole responsibility to set up and manage your retirement savings. Without an HR team to support you, that can be a daunting prospect in its own right.

It can also be demotivating knowing that you won’t enjoy the benefit of employer-matched contributions to supplement your hard work.

However, there are several effective options available that can help you kickstart your retirement savings:

Personal Pension

• Offers flexibility in contributions and investment choices.
• Provides tax relief on contributions.
• Allows you to build a substantial pension pot over time.

Self-Invested Personal Pension (SIPP)

• Provides even greater control over your investments.
• Offers a wide range of investment options, including shares, bonds, and property.
• Suitable for those with a good understanding of investments.

Stakeholder Pension

• Designed for people with low incomes or irregular earnings.
• Offers low-cost, flexible contributions.
• Provides a basic level of retirement savings.

Auto-Enrolment pension

• Primarily for employees, but also available to self-employed individuals.
• Offers a low-cost, simple option for pension saving.
• Low-risk, government-backed pension funds.

How to catch up on your retirement savings

Feeling behind on your retirement savings can be stressful. But, as we’ve already mentioned, it’s never too late to start. Here are some strategies you can use to help you catch up on your retirement savings and get back on track.

1. Assess your current situation

Determine the gap between your current savings and your ideal retirement income. Then identify areas where you can either cut back your spending or increase your income. For instance, a side hustle with a passive income.

2. Maximise contributions

Where possible, be sure to boost your contributions to your pension as much as possible. For example, if you’re part of a workplace scheme, ensure you’re maximising any employer match on your retirement contributions.

3. Explore other savings options

Take advantage of the current high interest rates by opening a high-yield savings account or cash ISA. A stocks and shares ISA can provide even better returns than a cash ISA if you don’t need to access your funds for a few years.

4. Get professional advice

Hilltop’s retirement planning experts can provide personalised guidance and create a tailored retirement savings plan for you. They’ll listen to your needs and ensure your investments align with your risk tolerance and goals.

5. Stay motivated!

Finally, it’s important to set realistic expectations. Remember, it takes time and effort to catch up on your retirement savings. So celebrate the small wins along the way and reward yourself for achieving milestones.

Remember, while catching up on retirement savings takes dedication and discipline, it’s achievable with a well-thought-out plan and consistent effort. Keep your retirement goals firmly in mind and you’ll be just fine.

Retirement planning and pension advice from Hilltop

Now you know how to start saving for retirement, remember that help is available to get you off to the best possible start. Hilltop’s experienced advisers can provide all the retirement planning and pension advice you need.

Take control of your retirement savings today by scheduling a call with a Hilltop financial adviser. Our advisers will work with you to create a tailored retirement savings plan that helps you achieve your retirement goals.

Get in touch today on 0161 413 7051 to kickstart your retirement savings journey.