However, stock market returns don’t always have to be this flashy. In fact, a mere 8% per year gain, with dividends reinvested, compounded over 30 years, can leave investors with a healthy figure. At 21 years old, this is a strategy I am currently employing to build wealth for later in life. Let’s take a closer look at three key ways I plan to do this.  

Compound interest and high dividends

So, where did I start? I currently invest a minimum of £200 per month into a Stocks and Shares ISA. I also invest in index funds, which mimic indexes like the FTSE 100 or S&P 500. Over the past 30 years, with dividends reinvested, these indexes have averaged returns of 7% and 10%, respectively. If I had started investing in the FTSE 100 with £1,000 to start and a £200 per month top-up 30 years ago – granted I wasn’t born yet – my investment would be worth over £250,000 today. Using the S&P 500’s healthier returns, I would have made over £470,000 from the same 30-year period of investing.

Another tactic I could use would be to focus on building a high-yielding dividend portfolio and reinvesting the cash generated. If my portfolio was generating 8% a year, with a 5% dividend reinvested, then my £1,000 would be worth over £920,000 when I was 50. Using this passive income hack is another way I can build a healthy retirement fund by benefitting from compounding.

Investing regularly

The key strategy here is to drip feed small amounts regularly. This investment style isn’t about generating big returns straight away, so there is no need to dump thousands into my portfolio at the start. This also helps to ease the pressure on my personal finances.

By investing small but consistent amounts, I also benefit from a phenomenon called dollar-cost averaging (or pound cost averaging in my case). Dollar-cost averaging works by investing fixed amounts consistently and benefitting from the overall upward trend of an asset, regardless of the price of each entry. This helps develop financial discipline as well as reduce the stress of investing.

Focussing on quality

The final way that I am looking to build a strong retirement fund is by making high-quality, long-term investment decisions. Whether this entails investing in index funds or choosing individual high dividend companies, I am going to take the long-term outlook. That is, investing in stable growth companies with a 30-year outlook, as opposed to high-growth stocks that could give me a quick return now.

Overall, by investing small amounts regularly, into index funds and high-quality dividend stocks, I think I can build myself a comfortable retirement fund over the next 30 years. There are always risks in investing in the stock market, but by taking this slow growth, consistent approach, I think I can make my money work in my favour for the future.  

The post Here’s how I’m using £200 a month to retire at 50 appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

These days it can be difficult to find the money to invest for retirement. As inflation continues to squeeze budgets, it can be tempting to cut back on long-term savings plans. Short-term needs can seem far more compelling.

I get it, we’ve all been there at times, and for me it was especially true when I’d only just started working.

At the same time though, I also had plans to quit the rat race early to be able to travel more. With the average retirement age in the UK being just under 65 years old, I knew I’d have to start investing early to beat that.

Having now retired early in my 40s, these are the two top tips on investing for retirement that really helped make it happen.

Reinvesting dividends for a better retirement

It can be eye-opening to see the impact of reinvesting dividends on market returns. Especially as time goes on and those reinvested dividends start to earn their own returns — the so-called snowball compounding effect.

For example, the FTSE 100 average return is usually quoted as around 7.9%. What people often don’t mention is that includes reinvesting dividends. Without doing that, the average rate drops to around 5.8%.

The difference may sound small, but if I had invested a lump sum of £10,000 back in 1984, the impact today would look like this:

After 10 years, the gap is small at just under £4k. But by the start of 2022, it’s a far more substantial amount at around £95k extra. That’s pretty much twice the final pot size between the two different methods of investing!

That difference comes from the FTSE 100 average dividend level of around 3.5% over the same time period. So imagine how that gap widens when I target dividend shares above that rate.

That could be Rio Tinto, M&G and Persimmon — if invested equally between them, I’d get an average blended dividend rate of around 11.5%. That’s only going to widen that gap with this reinvestment approach.

That’s great — but where I saved my cash mattered too. Time for tip two!

Planning matters when investing for retirement

When it comes to investing for retirement, planning ahead matters.

I’ve always invested in pension schemes first for the tax rebates they offered. But it’s my ISA investments that offer me far more flexibility.

By using a Stocks and Shares ISA, I can invest up to £20k each year free of any capital gains. And now, I’m also able to withdraw a regular tax-free income to fund my early retirement.

If I’d bought those three shares mentioned above, then after just 10 years of maxing out my ISA I’d have about £350k in total, ignoring any capital growth. That would give me a healthy annual tax-free income of almost £40k!

Picking the right investments for retirement

I honestly couldn’t have retired early without using these two tips for investing for retirement. But it’s worth saying that (unsurprisingly) it’s as important to pick the right underlying investments.

Dividend yields are prone to change and inflation needs accounting for — especially these days. But taking the time to research what’s best for my personal risk/reward appetite really paid off.

It’s not always been easy, but these two tips were definitely a big part of helping me achieve my dream retirement.

The post 2 top ways to invest for retirement appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Michelle Freeman owns shares in Rio Tinto. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The word ‘crash’ frequently conjures up feelings of terror in investors. However, I believe that a stock market meltdown may provide a once-in-a-lifetime opportunity to assist me in boosting my investment results. It could even allow me to retire sooner. Here’s how.

Building a share portfolio for retirement

Accumulating a portfolio of stocks and bonds significantly increases my chances of building a retirement nest egg. Any capital I invest has the chance to grow exponentially over the next 10, 15 or 20 years. However, stock values can go up and down, and dividends are never guaranteed. This is why I’m spreading my retirement portfolio across a wide range of companies and industries.

Great companies on sale

Firstly, I’m concentrating on high-quality businesses. No small-cap start-ups for me. Larger firms may not grow as fast, but they are more stable. Plus, I have time on my side. Retirement is still decades away and with the longer-term view I have, the more I’m likely to benefit. So, in my retirement portfolio, I’d invest in a combination of long-established firms that offer good dividends, as well as growth stocks. In this example, I’ll concentrate on an income stock like British American Tobacco (LSE: BATS).

While stock values may be down during a crash, the underlying business remains more or less the same. Provided the company does not have a lot of debt and it can maintain (or even increase) sales during volatile times, then I don’t need to worry about investing in them. Warren Buffet would tell me to buy more shares!

Better dividend value

Let’s look at the March 2020 market meltdown as an example.

Shares in British American Tobacco currently trade for 3,162p and generate a staggering dividend yield of 10.28%. However, in March 2020, I could have purchased these identical shares for just over 2,500p. Not only would my portfolio have gone up in value by more than 20%, but the additional shares I would have been able to afford would now be earning me an insane yield.

It’s always good to remember that dividends are not fixed values. They can go up and down, or a company could choose to not pay one at all. But the difference of a few percentage points in yield can take years off of a retirement goal.

If I invested £1,000 at an annual compounding rate of 8.2% for 25 years, I would potentially receive £6,173 in dividends. It would take me 39 years to earn the same amount of dividend income from the same investment compounding at 5.2% yearly.

Using a market crash to my advantage

These numbers are only to illustrate a point.

However, the principal remains the same. Through buying when the market is down, I could move my retirement forward without changing anything else about my investments. My money might work considerably harder for me if I bought during a market crisis. I don’t try to time the market very often. However, if a market crisis results in high-quality enterprises trading at sale prices, I will fill my boots — and hope to be able to put my feet up sooner.

The post I want to retire early. Here’s how a market crash could help me do just that appeared first on The Twelfth Magpie.

More reading

• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?
• Double a state pension thanks to dividend shares? Here’s how it could be done
• How much second income am I aiming for with £20,000 in this superb FTSE 100 dividend star?
• In the event of a stock market crash, is this one of the best stocks to consider buying?
• Here’s how much you’d need to invest in 5%-yielding dividend shares for £2,000 a year of passive income

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Need to get your retirement savings into shape? Here’s a look at four smart financial moves that could help you.

Consolidate your pensions

One of the smartest things you can do if you’re serious about retirement planning is consolidate all your different pension accounts. When you have multiple pensions set up (as a lot of people do because they’ve had multiple employers over the years) it’s hard to keep track of your overall pension balance and how your money is invested. This makes the process of planning for retirement more challenging.

By consolidating all your pensions into one account, you’ll find it much easier to keep track of your pension savings. This, in turn, will make it easier to determine whether you’re on track to achieve your financial goals.

I’ll point out that there are some situations in which a pension consolidation isn’t the best move. For example, if you’re a member of a final salary pension scheme, you may be better off leaving your account as it is. However, in general, bringing together your old pension accounts is a great idea.

Determine your overall asset allocation

Another smart move to make is to determine your overall asset allocation across all your different investment accounts (pensions, ISAs, savings accounts). When you have multiple accounts set up, it can be challenging to work out exactly how much exposure you have to different asset classes. This is a problem, because your money may not be invested optimally.

What I like to do at the start of every year is to create a spreadsheet that lists all my assets across my different accounts. Then, I group the assets into different asset classes (UK equities, global equities, property, cash) so I can see exactly how my money is invested overall. By doing this, I can determine whether I need to increase or decrease my exposure to certain asset classes.

Review your tax-efficiency

Next, make sure you’re taking advantage of all the tax-efficient investment options that are on offer.

You probably know that you can put £20,000 into a Stocks and Shares ISA per year and invest this tax-free, but did you know that the Lifetime ISA (which is only open to those aged 18-40) comes with bonuses of up to £1,000 per year?

And did you know that if you contribute into your pension, the government will add in some extra money for you? The more tax-efficient your strategy, the better.

Review your investments

Finally, the start of the year is always a good time to monitor your existing investments. Do all your holdings still suit your risk tolerance? Is it worth selling any small holdings to clean up your portfolio? Have your funds performed as well as you expected? And if not, are there better options? Is your portfolio diversified properly? Are there any stocks that are worth buying at the present time? These are all good questions to ask when reviewing your investments at the start of a new year.

The post Retirement saving: four smart financial moves I’d make to kick off 2020 appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Due to the fact that so many people choose to (or have to) work on a contract or freelance basis these days, there are still thousands of people across the UK who have hit 40 and don’t have a pension.

If you’re in this situation, don’t panic. There’s still plenty of time to build up a sizeable retirement savings pot. Here’s a simple three-step plan that could help you get your retirement savings on track.

Open your own pension

If you don’t already have a pension account set up, it makes sense to take control of the situation and open one.

One easy way to do this is to open a Self-Invested Personal Pension (SIPP) account with a provider such as Hargreaves Lansdown, AJ Bell, or Barclays. This is a government-approved, tax-efficient personal pension account that enables you to make your own investment decisions.

Contribute into it

Once you have a SIPP set up, start putting money into it on a regular basis.

One advantage of the SIPP is that whenever you contribute into it, the government will top up your contribution as a reward for saving for retirement. This is known as tax relief. So, for example, if you’re a basic-rate taxpayer and you contribute £800 into your SIPP, the government will top this up to £1,000 for you.

This is a super deal that could really help you boost your retirement savings. Currently, you can contribute up to £40,000 per year, or 100% of your income if you earn less than £40,000, into a SIPP and qualify for tax relief.

I’ll point out that if you run your own limited company, it may be more tax-efficient to make pre-tax contributions into your SIPP. You won’t receive the tax relief uplift, but the contribution will be treated as a business expense meaning your tax bill will be reduced. If you’re unsure as to the most tax-efficient option, it could be worth speaking to an accountant.

Grow your money

Finally, once you have your own pension set up and you’ve contributed money into your account, the key is to get that money working for you.

At 40, you still have decades to go until retirement. This means that you can afford to take on some risk in the pursuit of higher long-term returns, so stocks are probably the best place for your money. History shows that stocks tend to produce higher long-term returns than other assets such as bonds and cash savings.

With a diversified portfolio of stocks, you can probably expect to generate a return of around 6%-10% per year, on average, over the long run. Combine that kind of return with the tax relief top-ups from the government on your contributions, and you could potentially build up quite a sum of money by the time you hit retirement age.

The post No pension at 40? Here’s a 3-step plan to get your retirement savings on track appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Edward Sheldon owns shares in Hargreaves Lansdown. The Motley Fool UK has recommended Barclays and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As a ball-park figure, though, I’d say that you need a retirement pot of around £300,000 to live a comfortable retirement today. Assuming you withdrew 4% of your portfolio every year (this is the maximum amount that experts recommend withdrawing in order to ensure that your retirement pot lasts) and you also received full State Pension payouts, this would provide you with an income of nearly £21,000 per year (I’m ignoring tax to keeps things simple), which should be enough to provide for a ‘moderate’ lifestyle, according to the Pensions and Lifetime Savings Association.

With that in mind, let’s look at how to achieve a £300k retirement portfolio.

Start saving early

It goes without saying that the earlier you begin saving for retirement, the easier it is to build up a decent savings pot. Not only does a longer investment horizon give you more time to save, but it also gives you more time to take advantage of the power of compound interest.

Today, many people approaching retirement age have nowhere near £300k saved up. For example, according to research from Aegon, the average pension pot of those aged 55-65 in the UK is just £106,000. The chances are, many of those with smaller retirement pots left saving until the last minute.

Use the stock market to grow your money

Next, use the stock market to boost your retirement savings. While the stock market can be volatile in the short term, history shows that it has delivered excellent returns for investors over the long term. For example, the S&P 500 index has returned around 10% per year since 1926 – a far higher return than cash savings, term deposits, or bonds have generated.

As such, it makes sense to put your money into stocks if you’re saving for retirement and you have a long-term investment horizon.

Invest tax-efficiently and grab government bonuses

Finally, make sure you invest tax-efficiently and capitalise on bonuses that the government is handing out to those who save for retirement.

So, for example, consider saving into a Self-Invested Personal Pension (SIPP) account. This type of account comes with tax relief, meaning an £800 contribution is topped up to £1,000 for basic-rate taxpayers. If you’re under 40, another good option is the Lifetime ISA. This comes with 25% bonuses.

A £300k portfolio

Putting this all together, I calculate that if you started saving for retirement at 30, saved into a SIPP and picked up 20% tax relief on your contributions, and you generated a return of 8% per year through stocks (or around 5.5% above inflation), you’d only need to save around £200 per month to achieve a retirement portfolio of £300k (in today’s money) by age 65.

Even if you started saving at age 40, you’d still only need to put away around £365 per month to build up to £300k by 65.

Leave your retirement saving until 50 or later, however, and the process of building a £300k retirement pot becomes much harder.

The post You need £300K+ to retire comfortably today. Here’s how to achieve that appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

To help those retirement planners determine post-work income requirements, the Pensions and Lifetime Savings Association (PLSA) has put together a new set of ‘retirement living standards’, which details roughly how much money you need per year for different retirement lifestyles. Here’s a look at how much annual income the trade association believes is needed.

Single person income requirements

The PLSA believes that in order to live a ‘minimum’ lifestyle, a single person requires income of around £10,200 per year. This would cover all basic needs, with some money left over for ‘fun’, apparently.

However, if that person wanted to live a ‘moderate’ lifestyle, they’d need nearly twice that – £20,200 per year. This kind of lifestyle would provide more flexibility. To actually live a ‘comfortable’ lifestyle, a single person would require annual income of around £33,000. This would provide for luxuries such as multiple trips to Europe each year.

Source: The Pensions and Lifetime Savings Association

Couple income requirements

For couples, retirement income requirements are different because costs can be shared. Here, the PLSA believes that to live a minimum lifestyle, a couple need income of around £15,700 per year while, for a moderate or comfortable lifestyle, £29,100 and £47,500 is required, respectively.

Source: The Pensions and Lifetime Savings Association

So, what are the takeaways here?

The State Pension isn’t enough

One key takeaway is the State Pension isn’t enough to provide a single person with even a minimum lifestyle. At £8,767 per year currently, it’s well short of the £10,200 that’s needed to live a basic lifestyle as a single person.

If a couple were both entitled to the State Pension and were receiving £17,534 in income per year from the government, they may be able to get by. That’s more than the £15,700 annual income that the PLSA says is required for a couple to live a basic lifestyle. However, if that couple wanted to live a moderate lifestyle, the State Pension would be very much inadequate – the couple would need nearly 70% more income.

Act now before it’s too late 

Overall, these new retirement living standards are a reminder of just how important it is to plan and save for retirement. In most situations, the State Pension will not be enough to live a comfortable lifestyle. As such, it’s crucial to think about your retirement income needs ahead of time and start building up a retirement pot as early as possible. The sooner you start saving for retirement, the more chance you’ll have of living a comfortable lifestyle in your later years.

If you’re looking to learn more about saving and investing for retirement, you’ve come to the right place.

The post Here’s how much income you need for a comfortable retirement: the State Pension isn’t enough! appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Learn about wealth-building

One of the smartest things you can do while you’re still young is educate yourself on how to build wealth over the long term. One of the main reasons why many people reach retirement with an underwhelming amount of savings is that they don’t have a good understanding of basic wealth-building concepts such as compound interest and stock market investing.

For example, many people don’t realise that by investing in stocks, they could potentially generate a return of 6%-10% per year on average over the long term. So, they keep their money in a bank account earning 1% or so and it doesn’t grow much over time.

By learning about how to build wealth effectively early on, you’ll give yourself a huge advantage over the average saver. These days, it’s easier than ever to learn about wealth-building as there are plenty of books and websites dedicated to the topic. You can find some great information right here at The Motley Fool.

Open a Lifetime ISA

Another smart move you can make at this age is learn about the different types of investment accounts that are available in the UK such as the Stocks and Shares ISA, the Lifetime ISA, and the Self-Invested Personal Pension (SIPP). All of these accounts can help you boost your retirement savings.

If you’re still under 40, I’d recommend opening a Lifetime ISA account. The reason I say this is that this type of ISA, which is only open to those aged between 18 and 40, comes with 25% bonuses from the government. Those who qualify for it can contribute up to £4,000 per year, meaning that if you put the full allowance in, the government will deposit an extra £1,000 into your account for free.

This is an easy way to turbocharge your retirement savings, so if you qualify for the account, it makes sense to take advantage of it. Just be aware that you can’t touch your savings until you turn 60 (or buy your first house).

Build a diversified portfolio

Finally, once you have learned about wealth building and have an account set up, aim to build a rock-solid retirement portfolio. Here, the key to success, in my view, is to construct a diversified portfolio that will provide steady returns over the long run.

It can be tempting to focus on high-growth assets when you’re young in the hope of retiring early, however, from my experience, that’s a risky strategy that can backfire on you. Capital preservation is extremely important when building a retirement portfolio as large losses can really set you back. 

If you’re looking to learn more about building a winning long-term portfolio, you’ve come to the right place.

The post Under 40 and saving for retirement? Here are 3 smart moves I’d make today appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Do the calculations

One of the most important things to do in your 50s, if you haven’t done it already, is work out how much money you need to retire. This is not particularly straightforward as there are many variables to consider including your life expectancy, your retirement income requirements, expected investment returns, tax rates, and whether you qualify for the State Pension. Retirement calculators can be useful to a degree here, however, be aware that they tend to be based on assumptions. As such, it could be sensible to speak to an expert if you’re looking for tailored advice.

Once you have determined how much money you’ll need to retire, you can then analyse whether you’re on track to achieve your goals. You can do this by looking at how much money you have saved for retirement now, and projecting this into the future.

Boost your savings

At this stage of the process, many people realise that their savings are a little on the low side. For example, a recent study by SunLife found that those aged 55 and over in the UK felt they needed an extra £184,484 on top of their current retirement savings to retire comfortably. That’s a worrying statistic. However, if you’re in this position, don’t despair. There’s still time to boost your savings.

One of the best ways to save for retirement is to save money in a Self-Invested Personal Pension (SIPP) account. The advantage of this type of account is that your contributions will be topped up by the government. For example, if you’re a basic-rate taxpayer and you contribute £800 into a SIPP, the government will add in another £200 for you. Saving into a Stocks and Shares ISA is another good option. With this type of account, all your capital gains and income generated will be tax free.

Pay down debt

It also makes sense to pay down as much debt as possible in your 50s. This includes mortgage debt and credit card debt. You don’t want to be carrying this into retirement. If you can pay this off early on, it could help you boost your pension savings. According to research from Hargreaves Lansdown, paying off your mortgage at age 50 and redirecting the average monthly mortgage payment of £633 into a pension could potentially provide an extra £218,548 in retirement.

Optimise your asset allocation

In your 50s, it’s also essential to make sure that your asset allocation is suitable for your risk tolerance. With retirement not far off, you don’t want to be taking large risks with your money. However, at the same time, holding all your money in cash savings probably isn’t the best idea either as you want your money to grow faster than inflation. Again, if you’re unsure about this, it could be sensible to speak to an expert.

Finally, don’t forget to review your progress regularly. The more often you do this, the more in control of the situation you’ll feel.

The post Retirement planning in your 50s: four smart moves to make appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Edward Sheldon owns shares in Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, perhaps the most interesting statistic from the SunLife study was that, on average, those aged 55 and over believe they need an extra £184,484 on top of their current savings and pensions to live comfortably in retirement.

Huge savings gap

Clearly, that’s a significant savings gap. Yet I’m not exactly surprised by this figure. For a start, retirement savings across the UK, in general, are very low. For instance, a recent study by Aegon found the average 55 year-old Briton has retirement savings of just £105,000. Another study by Skipton Building Society found one in 10 UK adults over the age of 55 don’t have a single penny saved for their future at all.

Meanwhile, the cost of a comfortable retirement is rising rapidly. Given that average life expectancy is rising (you could live for 30+ years after retiring), the cost of living is increasing, and the State Pension (the income the UK government pays to those in retirement) is abysmally low at just £8,767 per year, you need to have a decent sum of money stashed away to be able to retire without money worries. Some experts believe the average person in the UK requires pension savings of £260,000-£300,000 to live a comfortable lifestyle in retirement these days.

So, what can those who are approaching retirement do to fill the savings gap?

Boosting your retirement savings

In my view, there are three key things to do if you’re aged 55+ and looking to boost to your retirement savings. Firstly, open a tax-efficient savings vehicle such as a Stocks & Shares ISA, or a Self-Invested Personal Pension (SIPP) and set up a regular savings plan so that you put money away for retirement on a regular basis.

Both of these savings vehicles will shelter your gains from the taxman, while the SIPP comes with the added benefit of tax relief (the government will top up your contributions).

Secondly, consider increasing contributions into your workplace pension. The more you contribute, the more tax relief you’ll receive and the faster your pension savings will grow. Additionally, make sure you’re taking advantage of any ‘contribution-matching’ schemes. Some employers will agree to pay more into your pension pot if you agree to increase your contributions to the scheme too.

Finally, make sure you’re invested in the right assets. If you’re looking to grow your wealth, it’s probably a good idea to have exposure to stock market-based investments such as shares and funds. The reason for this is that these assets tend to outperform cash and bonds by a wide margin over the long term, meaning they’re much more effective at boosting wealth.

But if all your savings are in cash, or ‘low-risk’ funds within your pension, you may struggle to close that savings gap.

The post Retirement saving: those aged 55+ require an extra £184,484 to retire comfortably appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.