Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

How do I plan for retirement in my 50’s?

When you are in your 50’s, your financial priorities are likely to be changing. Your children are likely to be financially independent, you may be close to paying off your mortgage which will mean your outgoings will change and you are getting closer to retirement.

Is it too late to save for retirement at 50?

At Four Wealth Management, our Financial Advisers recommend saving for retirement as soon as possible. This is because the sooner you start saving, the more time the money has to potentially grow. When saving into a pension, you also have the added bonus of getting tax relief from the government subject to limits and allowances.

However, if you are over the age of 50 and just beginning to think about planning your retirement, it is not too late.

Creating a retirement plan when you are in your 50’s

When starting to think about planning your retirement, you should start by defining your retirement goals. Some goals that one of our Financial Advisers would help you to consider include:

  • How much money are you hoping to have in your pension pot when you retire?
  • What age are you hoping to retire?
  • How much money do you need to maintain your current lifestyle?

At Four Wealth Management, a Financial Adviser will look over your goals and check they are realistic. Your Financial Adviser will then create a bespoke retirement plan tailored to you. The plan will determine how much money you potentially need to save into your pension each month with the aim of allowing you to withdraw enough money each month when you retire to maintain your current lifestyle.

During 2020, the State Pension age is increasing to 66. This is going to increase to age 67 between 2026 and 2028. The current state pension for the 2019/20 tax year is £168.60 per week. This can be factored into your retirement planning but the new State Pension alone is unlikely to be enough money for you to maintain your current lifestyle, so it is important to save as much as you can into your private pension.

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Starting to save for your retirement at the age of 50

If you have not saved much for retirement already, then it is likely you will need to delay your retirement in order to reach your retirement goals. If you start saving for your retirement at the age of 50, and do not retire until the age of 67, you have 17 years to save for your retirement. This is a long time frame, which will help you reach your retirement goals.

For example, if you are a basic rate taxpayer (currently 20%) and at the age of 50 you save £500 into your pension each month, you will also get tax-relief of £125 which means £625 is going into your pension monthly. If your investments grow 5% per year over 17 years, your pension pot could be worth £201,915.18 by the time you retire at the age of 67*.

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Reduce or eliminate debt before you retire

One thing that is likely to affect when you retire is outstanding debt. You should try to reduce or completely eliminate any debt you have before you retire. This will mean you have less outgoings at retirement so will need less income from your pension.

Your biggest debt is likely to be your mortgage, if you still have a few years left on your mortgage, you could overpay each month in order to pay off your house sooner. Alternatively, you could downsize your house. Once your mortgage is paid off, you are likely to have more income that you can contribute to your pension pot before you retire.

When you are looking to reduce your debt, you should focus on paying off high interest debt first.

Make the most of tax relief

A pension is one of the most tax-efficient ways you can save for the future. Subject to certain limitations, tax relief is available on member contributions to the higher of £3,600 or 100% of relevant UK earnings.

Member contributions to a personal pension will usually be paid net of basic rate income tax, the pension provider will then reclaim basic rate income tax from HMRC and add it to your pension pot. For example, if you pay in £300 per month, you will get tax relief of £75. For higher rate taxpayers, the government could put in 40% or 45%, with higher and additional rate tax relief being obtained through Self-Assessment.

Start retirement planning today

Don’t delay your retirement planning further, speak to one of our Financial Advisers about creating a bespoke retirement plan.

The value of an investment with St. James’s Place will be directly linked to performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

*This figure is for example purposes only and is not guaranteed. What you get back depends on how your investment grows and the tax treatment of the investment.

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If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

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