Tag: Retirement Planning

Investments: Why Saving is Not Enough

My aim with each blog post is to help you move to a better financial future. I believe that there is not enough financial education in the national curriculum and I intend to share anything helpful that I have learned along the way. I am by no means a financial expert. None of the information on this website constitutes financial advice and is provided as general information only. This is my personal finance blog; my marketing blog is over here and I have been blogging there since 2010. I hope you have found this information useful. Thank you for reading.

Best regards,

Mike

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Should you Combine Your Pensions?

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Over the course of your career, you are likely to move jobs and contribute to more than one pension. Keeping track of all your separate pensions and monitoring the relative performance can be a difficult task; there’s also the often complicated fees and charges to be taken into consideration too. It is no wonder that many working adults in the UK do not stay on top of their retirement planning in general and pensions in particular.

Your Pensions and Performance

When you have tracked down your pension pots, write to the pension providers and if necessary advise them of your new address. I add this point in because whenever I have lost track of a pension it is because pension providers have been sending the annual statements to an old address. You must notify them when you move house. Once your details have been verified, when you call your pension provider they will be able to give you a statement balance for your pension. Repeat this step for each of your pension pots. Ideally you will have the balance from previous years too. This will enable you to calculate which is your best performing pension.

Exit Charges

Once you have worked out which is your best performing pension it would be great if you could simply move all of your pensions into the best performing pension and go on to live happily ever after. Well, unfortunately it is not that simple, whilst most pension providers will usually let you add to an existing pension pot free of charge the same cannot be said ot exiting an existing pension plan. You are likely to face exit charges for exiting the pension plan early. Give your pension provider a call to find out the full extent of the charges that you will face if you exit the pension plan.

What Should You do?

After your research and phone calls, you will have a better understanding of whether it is a good idea to combine all of your pension pots into one. I cannot give a generic recommendation in this case. Please also consider the investment funds that your pensions are invested in on your behalf. You could have set them up with different risk profiles; keeping separate pension pots could be a smart way to diversify your pensions portfolio and reduce investment risk. At some point as you are evaluating your pensions and deciding what to do it would be sensible to consult an independent financial adviser.

Have you tracked down a lost pension pot recently ? Have you worked out which is the best performing pension? Let me know in the comments section below. There is no need to write any specific amounts!

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Best regards,

Mike

Have you saved Enough into Your Pension?

Why you Should Track Your Net Worth

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I hope those you who did not already have a monthly household budget, have now had chance to create one. If not, this post will help you, How to Create a Budget That you can Stick to. One stage on from creating a monthly budget is to create another simple spreadsheet that records your total net worth.

Calculating Your Net Worth

Net Worth can be defined as the sum of all of your assets minus your liabilities. For many of you, the thought of creating a spreadsheet with all your assets and liabilities recorded in one place might fill you with dread. If you have large student loans or credit card debts, recording your total amount of liabilities and assets might be a painful process. However, this is a necessary step to track your net worth.

Your personal net worth looks at the bigger picture, it’s not just your monthly income and outgoings. You also get the opportunity to track all of your assets as well as your liabilities. Assets include properties, savings, investment accounts, stocks and shares and businesses owned where applicable; liabilities include, mortgages, student loans, credit card debts and loans.

For the sake of simplicity it is acceptable to leave out all regular monthly expenses that are paid out of your monthly salary or wage. When thinking about net worth I always remember a quote attributed to the mathematician, Karl Pearson.

“That which is measured improves. That which is measured and reported improves exponentially.”

Karl Pearson

Improvements to Your Net Worth

This is exactly why we are doing this! Your net worth will improve. When you complete your first total net worth tracker spreadsheet, it will take some time. By the way, feel free to think of a more exciting title than Total Net Worth Tracker Spreadsheet. 🙂

When you come to update it after a month, unless you have suffered some financial calamity, your total net worth will have increased. For example, if you have made payments to student loans and or credit cards, their totals will come down slightly and your net worth will have gone up. If you are like me, you will find this incredibly motivating! As an aside, do not compare yourself to others, just track your own progress. In time, deficits will turn into surpluses. Money that was originally to pay debts can be diverted into savings accounts when those debts have been paid. Tracking your net worth is an excellent habit and will help you to transform your finances.

What Should you do Now?

Create your total net worth spreadsheet and update it each month. Here’s a downloadable spreadsheet that you can use.

Are you already tracking your net worth ? If so, what has been the improvement in the last 12 months? Let me know in the comments section below.

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How Much Should You Save?

Best regards,

Mike

Are you and Your Partner Financially Compatible?

Have you Saved Enough into Your Pension?

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Have you saved enough into your pension? For a large proportion of the United Kingdom population the answer is no. Most people are not saving enough for their retirement. Does your vision of retirement include freedom to travel and time to enjoy a comfortable standard of living? If we all to have the retirement that we aspire to one day, we will need to make sure that we are on track to achieve it. It is time to get serious and work out how much that will cost.

Pensions: Why Many People Are Failing

There are a lot of assumptions built into pension calculations, assumptions that are not true for many people. For example, the assumption that you will work 40 years of continuous employment with your salary continually increasing by X% and you maintaining your pension contributions at 12% of your salary for 40 years. Some of the realities of life such as redundancies, women taking time out to raise a family, individuals starting businesses, part time work, time out for studying and credit credit or student loan debts don’t exist in this Continuous Pension Saving Utopia.

I think when people realise that they are not on track to hit their pension goal, they give up and hope someone other than themselves will solve the problem. Let me be more specific, if you would like to live on a retired income of £25,000 you will need to have a pension pot of £500,000. That is assuming that you use your pension pot to purchase an annuity giving you the annual income of £25,000. Try this pension calculator to work out how much you would need at other income levels. As you can appreciate, £500,000 is a large amount especially when it’s considered that the average pension pot in the UK is around £50,000.

What Should you do Now?

Pension Pot

Work out the total pension pot you currently have, if you have had several jobs during your career you may need to do a little detective work to track down all of your workplace pensions. This article will help you find your pensions.

Up Your Contributions

Re-evaluate your household budget, can you afford to increase your contributions? If you are in a workplace pension then you should maximise the contributions that you make because these will be matched by your employer. If you are self employed, you should also increase your contributions.

Develop a Plan B

It may be that increasing your pension contributions alone will not be enough for you create a big enough pension pot for retirement. If that is the case, you should develop a Plan B.

Property is a great way to supplement your pension savings, you could downsize your main residence and use the profit for your retirement. Alternatively, you could rent out a spare room and earn extra income that way. There are other ways too, they include equity release and property investing. You can read more about these ways via this link.

If you own a business, this could become your Plan B. Depending on the nature of your business, you may be able to sell it and contribute money to your pension savings after the sale.

Don’t Lose Heart

The fact that you are reading an article like this is a positive in itself. You still have time to improve your level of preparedness for retirement and there are a number of ways you can do so.

Are you on track with your pension savings? If not, what are you going to do about it? Let me know in the comments section below.

If you have enjoyed this post you will also like the following posts:

Why Choose a Gold IRA?

What are the Best Savings Accounts for Children?

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How to get Value for Money When Buying Foreign Currency

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

How Much Should You Save?

Best regards,

Mike

What are the Best Savings Accounts for Children?

Why Choose a Gold IRA?

This post may contain affiliate links please read our disclosure for more info.

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An individual Retirement Account (IRA) is a particular type of savings account that helps people prepare for retirement in the United States. There are tax advantages to saving in an IRA account. In the United Kingdom, the equivalent savings account is called a Personal Pension. A 401K is a company backed retirement plan (Workplace Pension in the UK), whereas IRAs are started by an individual.

IRAs can be subdivided into Roth IRAs and Traditional IRAs. With Roth IRAs, there is no tax deduction for contributions but when your investment earnings are distributed in retirement this is done tax and penalty free. Traditional IRAs by contrast, do offer deductions for contributions but when your funds are distributed at retirement taxes on investment earnings have to be paid.

IRA funds can be invested in individual stocks, bonds and cash. There are also many mutual funds that you could choose from. Either on your own or after receiving advice decide on an asset allocation that you are happy with for your IRA.

What is a Gold IRA?

Gold IRAs were created by the Taxpayer Relief Act of 1997. A Gold IRA account is a way to diversify your retirement investments further. A Gold IRA gives the investor the chance to own physical Gold, Silver, Platinum or Palladium.

To invest in a Gold IRA, you will need to set up a self-directed individual retirement account (SDIRA), this is an IRA in which the investor is in charge of making all the investment decisions.

What are the Benefits of Gold IRAs?

Pros

Investors have created Gold IRAs because they perceive them to be a counterbalance to what is happening with their more traditional investments. If paper based assets such as stocks are trending downwards, Gold tends to move in the opposite direction. Adding a Gold IRA will diversify your retirement investments. Since the financial Crisis of 2008 Gold IRAs have increased in popularity because of this investors’ desire of investors to spread risk with their retirement investments.

You can potentially benefit from increases in the price of Gold, of course this cannot be guaranteed. Between 2000 and 2012 the price of Gold increased for 12 consecutive years. While stocks can literally become worthless, the price of Gold will never be worth zero.

Remember, it is possible and advisable for an individual to have more than one IRA. You could hold one mutual fund IRA and a Gold IRA, for example.

Cons

Setting up a Gold IRA is quite a complicated process. First of all, you need to find an approved custodian (Broker) for the IRA and an approved Depository, where the Gold will be stored. Then you buy the Gold and have it transferred to the Depository.

Historically, some Gold IRA companies have not are not completely transparent about their fees and investors have experienced surprises after they have invested. Before you create a Gold IRA or rollover an existing IRA into a Gold IRA ensure that your custodian has confirmed all costs and fees.

If you are thinking about setting up a Gold IRA, Regal Assets is one company that you should consider. Click here for a free Gold IRA guide.

Do you have a Gold IRA already? How do you think your investment is performing? Let me know in the comments section below.

If you have enjoyed this post you will also like the following posts:

How to Teach Your Children About Money

How to get Value for Money When Buying Foreign Currency

Save up to £500 Per Year With a Sim Only Mobile Phone Deal

How Much Should You Save?

Best regards,

Mike

The owners of this website may be paid to recommend Regal Assets. The content on this website, including any positive reviews of Regal Assets and other reviews, may not be neutral or independent.

How Much Should You Save?

This post may contain affiliate links please read our disclosure for more info.

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For many people, saving money is not exciting; when they consider what their savings may allow in the future it can become more exciting. This may mean the chance to have an expensive family holiday or a more comfortable retirement.

Save Money

Whatever your level of salary or wages, you should aim to save 20% of your earnings. Depending on where you currently are in terms of your financial health, this 20% figure could seem insurmountable or very manageable. Please remember this is a guideline.

This guideline is based on the following breakdown of income; 50% on mandatory expenditure including accommodation and associated bills, 30% on discretionary expenditure and 20% on savings.

Is this the Dream versus Reality?

The chart above is from Trading Economics and clearly demonstrates that in the UK most households are not getting anywhere near the 20% figure. My own anecdotal evidence is that there are times when I have been able save above the 20% and other times when no saving has been possible at all.

For our US readers, the situation is actually slightly worse, as you can see from the chart below. There is data from other countries as well on the website, so please explore to find figures for your country if you are not from the UK or US.

I would like everyone who reads this post to take a step forward to a better financial future. We have just started a new month, commit with me to saving 20% of your income, or as close to that as you can. If you comfortable doing so, leave a comment below indicating the percentage of your income that you will save this month, this month being June 2018.

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