Early retirement is a dream for so many of us, though one that’s easily possible if you get your thinking hat on and begin to work towards it now.
Early retirement can provide you with the holiday of a lifetime and allows you the chance to do things at your own pace from then on in. People retiring at 55 in the UK will push 80 according to statistics and there has been a 10 percent rise in the number of people retiring before the state pension age.
More flexible rules towards tax and pensions mean that there is an increased onus on private pensions and retiring at an earlier age. However, the downside is that you need to build up the pot faster and as people live longer, it needs to last longer.
Saving now is the best way to retire early. People who begin in their 20s end up with a quite significant pension by the time they reach their later days. For example, if you save £100 a month from the age of 25 to 65, that will leave you with a £200,000 windfall by then – not so bad. Simply put, the earlier you begin to build up that nest egg, the more you will have for an annuity and the better pension.
There are all sorts of government incentives to encourage pensions and a taxpayer gets £78 topped up to £100 when they contribute into a pension in tax relief. If you’re in the higher rate of tax then you will manage to receive £100 for every £60 you put in. This allows you to build up your contributions significantly and make some decent savings.
People can get tax relief on higher amounts than ever before, meaning you can get savings on 100 percent of earnings up to £225,000. This allows you to really push those savings to the maximum and is great for higher earners. Prior to this, you could only get relief on between 17 and 40 percent of savings.
For instance, if you get a lump sum, why not invest that into your pension. It could be from a will, make the most of accident at work claims or end up with a form of a gift. Investing is wise and means money in the long term.
If you have an employer pension scheme on the go, then join it. If you don’t you’re essentially cutting your pay. Final salary pensions take earnings into account and are based on earnings. Employers add money to meet a percentage of the amount you contribute to your pension, meaning you are getting money from your employer for just contributing. Just do it.
When it comes to purchasing an annuity it’s a tough choice and you should take a look around rather than go for the suggested option. You can’t turn back and change your mind, so you should invest time in investing. Accepting the first thing to come your way will mean that you may lose out over 10 percent. So, take your time and do the work.
People who have ended up with issues that may shorten their lifespan such as a work accident can make a claim for an impaired life annuity – this often boosts funds by 40 percent.
Follow this advice and you could significantly cut the age of your retirement and really save on the amount of time you have to work.
Introduction To The New Challenges After Retirement
There are many challenges to deal with after retirement, which is always a major life transition. As well as the loss of routine, and the need to adjust your priorities for the future, retirement also brings with it some particular financial challenges.
These challenges can range from dealing with your pension plans, through to set up your finances to make the most of your money, while having to budget carefully to ensure that you can live comfortably on your income.
In terms of the basic costs and the challenges faced by retirees, anyone approaching retirement age needs to look at their available working pension plan, and how it is structured for a payout.
Women and men reaching the retirement age of 60 and 65 can currently claim state pensions, but this is set to change in the future – more people are working for longer, and the state pension age will eventually rise to 67.
These changes will also affect pension credits and benefits, and should always be reviewed in the years leading up to planned retirement.
For a working pension, you may have been paying into a retirement scheme for years and will have several options. You can opt to withdraw money from your pension over time, which will provide a regular income.
Alternatively, you may want to convert your pension fund into an annuity, set by a provider, that allows you to either set up a fixed or varying amount over time to draw on.
In this context, you can choose to switch your pension fund to a new annuities provider if they offer a good deal. This option is generally a good idea if you want more control over structuring your pension payments.
In terms of how you’re going to deal with a new lifestyle, it’s important to plan for how you’re going to spend, and what kind of debts you can afford. Check through your current insurance policies to see whether you need to make adjustments, and think carefully about mortgage payments – you may be tempted to use your pension fund to clear your mortgage, but this may not be practical in the long run.
Your priorities should be having a solid income to support yourself and a partner, as well as having enough money to cover bills, general shopping, and holidays. This doesn’t mean cutting back significantly on a lifestyle, but it does mean learning to live within your means, rather than taking financial risks. Some budgeting approaches might include cutting back on eating out or only having one, rather than two holidays abroad a year.
At the same time, it’s worth being wary about making risky investments or taking out large loans, if it’s going to affect your budget. You should also look at how much you can withdraw from your pension fund as a lump sum before paying tax – 25 percent is about the average if you’re younger than 77. It’s also possible to benefit from more general tax-free savings through ISAs while factoring in the fact that you’ll no longer be making National Insurance contributions.
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In general, then, there’s no obstacle to spending and enjoying yourself if you’re aware of what your financial limits are, as well as how savings and investments can top up your income from year to year. For further advice, and to resolve disputes with pension providers, it’s worth contacting the Pensions Advisory Service (TPAS), as well as the Money Advice Service and Citizen’s Advice Bureaus.
How To Boost Your Weekly Income During Retirement?
After working for the majority of your life, you want to retire comfortably. Unfortunately, for many, a worry-free retirement may be mired by financial troubles. While a wise money manager may find themselves able to budget their money and not live above their means, many retirees find themselves having to eliminate things from their dream retirement, or worse, having to scrape pennies to make ends meet.
Finding sources of extra income, as a senior, can be challenging, and options are limited. Fortunately, there is a way to boost your income using tools that many retirees already have available to them. The property, more specifically, equity in a house can be used to boost limited income and give retirees a way out of their financial woes.
How Does Equity Release Work?
Many people who are retired have bought homes; throughout the course of their careers, they may have paid their homes off, or have very little left to pay off. In short, equity release is a way of raising money against the value of your home.
In such cases, one would borrow money against the value of their home and the equity contained therein. You do not have to pay the money back at all until the house is sold. The sale of the house could go ahead after your death or perhaps if you choose to move into a private care home.
Before you decide to try an equity release, you may want to consider the pros and cons of this particular financial maneuver, as it is a very important decision in which you have to commit to.
What are the Requirements?
In order to apply for an equity release scheme you usually need to meet the three following requirements:
- Have a house that is in reasonably decent shape.
- Be at least 55 years old or more.
- Have a house that is paid for or either has very little left to pay off on it.
Advantages of an Equity Release
- You can receive payment in the form of a lump sum, monthly installments, or you can have the best of both worlds.
- You don’t have to move anywhere, as the house is still yours.
- Reputable plans ensure your stability by allowing you to live in your home debt free until your home is sold, or until you die.
Different types of equity release plans:
- A loan is granted to you, using your home equity as collateral
- You retain full rights to your home, although you will still be responsible for paying the mortgage and all interest that is accrued therein
- When your home is sold, you repay the mortgage out of the sale price. A reputable equity release scheme will ensure that what you owe will never exceed the value of your property.
- Lenders will offer participants what is called a ‘drawdown’ facility, this means that instead of getting all of your money in one lump sum, you have the ability to take draws periodically when you need them.
- In this setup, you will sell your home to a reversion company.
- You lose the rights to your property and you are no longer the owner of your home, or conversely, you only own part of your home. You then are given a lease, with terms, that allows you to live in your home rent free for the remainder of your natural life or until you go to a private care facility
- The reversion company will pay you a percentage of what your home is worth
- The reversion company will receive its money from the property when it is sold
Practical Advice For Those With Bad Credit in Retirement
Having bad credit is a simple fact of modern life for many of us. Indeed having a poor credit score is far from unusual as perhaps it might have been twenty years ago. Recent evidence has shown that up to a quarter of Americans are in the ‘least creditworthy’ category for obtaining finance. One of the consequences of having bad credit is that it makes borrowing more expensive and harder to secure.
Unfortunately, it is the case that the people who need to borrow the most find it the hardest to get credit. Conversely, those who do not need to borrow (the wealthy) find financial institutions falling over themselves to lend to them.
It is all a question of risk for the lender and those with an adverse credit history are deemed more of a risk as they are more likely to default on a loan. However not everyone who has bad credit has been a reckless spendaholic, many people fall into bad credit through family or employment changes.
As mentioned already, a poor credit history makes lending more difficult and often more expensive. In retirement, it is doubly as difficult as in most cases your income is lower. You cannot turn to the mainstream lenders, as they do not want to take on higher risk customers.
Following the recent credit crunch, getting credit even for those with a good credit history has become harder and more costly. In short, the banks are not as keen on lending as they once were. So with banks out of the equation, many people are forced to look at other ways of raising money…
Friends and Family
Borrowing money from friends or family has its pros and cons. The benefits are that the loan is not ‘official’ meaning no one can come and repossess any of your belongings if you default. Secondly friends and family are far less likely to charge a high rate of interest and far more likely to be flexible about when you pay it back.
However, lending between family and friends can cause tension and resentment, especially if the person borrowing the money has difficulty paying it back. Also if it becomes too easy to borrow it can make individuals overly reliant on one particular person for money.
Short Term Lending
If you need a loan for a short period then you may have to turn to a PayDay loan company. These loans are unsecured and often do not require a credit check. Lenders normally just ask for evidence of regular employment or income (in the case of someone who is retired). Beware that the interest rates on these loans are much higher than a bank might offer you. In fact, these loans are only best taken in emergencies.
Bad credit Finance
There are still some lenders out there who will lend to those with bad credit. Expect the APR interest rates to be higher compared to a conventional loan, however.
A lender will look at your credit history to see if there is enough evidence showing that you are likely to meet the repayments. If you have had poor credit in the past but have improved your repayment history more recently then a lender may that into account and agree on a loan.
6 Beautiful Spots in Europe To Consider For Retirement
The rapidly growing UK senior demographic is increasingly choosing to spend their golden years living abroad. In fact, spending retirement in Europe has developed into a popular trend. Surprisingly, retiring abroad has many benefits when compared to the typical condo in the UK.
More and more, older citizens faced with rising healthcare and housing costs at home are looking to stretch their retirement dollars by changing scenery after retirement and investing in Europe real estate.
As you’ll see, many parts of Europe offer retirees lower living expenses and a culturally rich lifestyle. A retirement featuring lower cost of living and a higher quality of life: what’s not to love?
Retirees love the relatively affordable housing and HSBC Bank’s Expat Navigator ranked Belgium one of the 10 best countries for expats to live. The city is rich in culture and history and is a prominent World Heritage Site of UNESCO.
Bruges is sometimes referred to as “The Venice of the North” because of the beautiful canals that dot the city. In 2002 Bruges was chosen as the ‘European Capital of Culture’.
Costa Del Sol, Spain
This beautiful region, also known as the “Coast of the Sun”, was recommended by AARP as a prime retirement destination. In addition to being a world-class tourist destination, Costa Del Sol boasts excellent infrastructure, first-rate medical facilities, excellent healthcare, and beautiful villages and beaches. Not to mention Spain is ranked in the top 10 countries for expatriates.
With its relaxed pace of life, eye-catching scenery, and Old World charm, Dubrovnik offers retirees culture, history, and architecture. The town is nestled between the sea and the mountains and offers beaches as well as cultural events. Known as the “Pearl of the Adriatic, Dubrovnik has a low cost of living and a Mediterranean climate.
Retirees can relax knowing Copenhagen has a world-class healthcare system. The capital city has three nearby beaches with a total of 5 miles of shoreline just a short 30-minute cycle ride from the city centre.
The city is easy to navigate and has many parks and bicycle paths. Numerous studies have documented Denmark’s high quality of life. The research found that Denmark has the highest life satisfaction rankings worldwide.
Portuguese health-care facilities are very modern in most places. Active seniors will discover plenty to do in Portugal; golf, sailing, diving, and biking are only the beginning. If that’s not your thing there are gardening, cultural, and bridge groups to keep you busy.
All of the great cities of Europe are right at your doorstep. You can drive to Madrid, Seville Barcelona, or the south of France. Popular towns for retirees include Chaves, Porto, Cascais, and Lisbon
Vienna is a modern and cosmopolitan city. As the capital of Austria, Vienna has been designated a UNESCO World Heritage Site. Of course, there are hiking and other outdoor recreation activities available in the nearby Alps.
It’s known as the City of Music because Wolfgang Amadeus Mozart, Ludwig van Beethoven, Franz Schubert, Johannes Brahms, and more have worked there. Art and culture play a vital role in Vienna and the city is consistently ranked as one of the world’s most livable cities.
If you’re looking to surround yourself with new scenery after retirement these six beautiful spots in Europe should give you plenty to think about.