Planning For Retirement At 50
Planning for retirement at 50 years old? Surely, too late in life to be considering such a thing? Well, that’s what conventional knowledge would have you think, anyway. In fact, many of the financial industry’s top pundits advise that people should start building a sturdy investment portfolio from as early as their mid-twenties. This attitude has been instilled into the British public as a model that’s suitable to one and all, even though it couldn’t be any further from the truth.
It’s often assumed that only through a lifetime of saving, intelligent investing (usually into an ISA) and regular contributions to state pensions are we able to provide for ourselves in later life. 50 without a retirement plan? Heaven forbid.
For many people, being on the wrong side of 50 years old without a hint of a sizeable pension pot is truly terrifying. Many are encouraged from a young age to invest all the way up until retirement and have been offered no real alternative since. So, planning for retirement at 50, is it really feasible?
The reality of the matter is that many people are only able to start investing when they get to 50. The reason? Perhaps it is only now that their financial position is favourable enough to allow them to do so.
Whilst experts advocate compound interest as an invaluable tool for those looking to save for their financial future, especially to those earlier on in life, many people from the ages of 20-40 simply may not have the money to consider investing full-stop. Research dictates that wages peak in the mid-40s and 50s. And not only is a person’s average income at its highest at this point in life, but people have far less outgoings to consider. For the most part many people no longer have to account for mortgages (terms are typically 25 years), meaning the money that they have spare will be able to be contributed to much more practical endeavours (i.e investing). Those within this age bracket that have children may start experience less of a financial commitment. Once their kids have flown the nest and are capable of getting their own jobs and providing for themselves, there’s less financial stress on the parents (well that’s the theory anyway!). For many, only at the very beginnings of middle age does investment become a very real means of preparing for your retirement.
A figure calculated by pensions firm Quilter, maintained that a 50-year old with a salary of £70,000 would be able to build a pension worth £985,000 by the age of 67 if they contributed the maximum amount allowed each and every year.
This figure was calculated on the assumption of an annual return of 4 percent (after charges) and the state pensions “annual allowance” remains at its current level of £40,000 a year. Even if annual returns were 3% lower than anticipated, the pot would still be worth in the regions of £744,000 by the age of 67.
Now saving this amount of money each year may seem like a bit of an implausible feat, but its important to bear in mind that this figure takes into account the tax relief that is accredited to all pension savings. So for instance, someone who earns £70,000 a year would only really have to contribute approximately £27,000 of their annual income to make the total amount of money up to £40,000 to then add it to their pension pot.
Now £744,000 is a fair old amount of money but the fact of the matter is, there’s always the potential to earn more.
When you invest with The House Crowd IF ISA for example, you could earn 7% p.a. through investing in secured property development loans and bridging loans. Whilst the risk associated with an IF ISAs and traditional property investment in general may be higher than your traditional cash ISA, they offer investors the potential to earn a bank-busting rate that could give you that little extra cash-cushion when preparing for their retirement.
Already got capital invested in an ISA? No problem. With traditional financial institutions continuing to deliver poor returns each year, many people are looking for better ways to provide for their future. That’s where we come in. When you transfer your existing ISA to The House Crowd’s IF ISA, you can earn a target interest rate of 7% p.a. tax-free and benefit from a diversified loan portfolio secured against UK property.
Sick of settling for less? Complete your registration and apply for our IF ISA today.