As your life changes, so do your financial needs and priorities.
Although everyone’s situation is different, there are some sensible provisions everyone should be making throughout their lives.
There are also some common mistakes that are made at different stages of life. Avoiding these can help ensure you are financially secure and able to hit your financial goals. Here are the biggest errors to avoid at each age.
In your 20s
Assuming you are too young to think about retirement
When you are starting your first job and dealing with new expenses on top of student debt, your pension is the last thing on your mind. But starting now - particularly if you have an employer who will contribute to your retirement savings - will make everything much easier when you are older.
If you earn more than £10,000 you will be automatically enrolled into a pension by your employer1, and you must contribute a minimum of five per cent, while your employer has to contribute three per cent. There are other options for retirement savings, including a setting up a personal pension or Lifetime ISA, so it may be a good idea to contact an expert financial adviser to learn what your options are.
In your 30s
Not taking appropriate risks
In your thirties your disposable income is likely to increase, and if you are saving for later life, you ought to be thinking about putting more away. But it’s important to remember that if you want your savings to outrun inflation, you need to use the appropriate investment vehicles to save tax. You should also ensure that your savings have the appropriate risk profile so that they can grow, and you can benefit from compounding over time.
Not taking enough risk means that your savings may lose value in real terms due to inflation, especially in a low-interest rate environment. However, this needs to be weighed up against the fact that investments can go down as well as up. Everyone’s attitude to risk is different but a financial adviser can help you build a portfolio that matches your personal risk tolerance.
In your 40s
Not having financial protection
For many of us, our 40s represent peak earning capacity, but it’s also a time when your financial plans can be derailed by illness, unemployment or other unexpected events, at a time when you may have serious financial commitments such as school fees and mortgage payments.
Protection such as critical illness cover, and life insurance can help make sure that you can continue with your life plans if changes should occur.
In your 50s
Not topping up if needed
It’s easy to stick your head in the sand about retirement income until late in the day, but it is better to know early if your savings won’t give you the income you are hoping for.
Get a state pension forecast in your fifties to find out whether you’ve paid enough national insurance for the state pension, and also write to trustees of any pension plans you have to ensure you know what’s available to you.
If you don’t have enough saved up, there is still time. Regular top ups can help you build your pension pot quicker, so you have enough for retirement.
In your 60s
Not getting the right advice
It is important to get the right help when you save for retirement, but advice about decumulation is vital too. Decumulation is how you spend the money you’ve saved to give you the retirement you hoped for.
It’s important to get right, to ensure your money doesn’t run out and you don’t end up paying unnecessary amounts to the taxman. A good decumulation strategy may need expert help as the tax surrounding spending your pension can be complex.
In your 70s
Not planning for your legacy
Talking to your family about money can be uncomfortable, but in your 70s not doing so is one of the biggest mistakes you can make. You’ll want to make them aware of your will, your wishes around later life and how you want to distribute any inheritance. Inheritance tax is an important thing to consider here, so a good strategy will help to mitigate the amount your descendants pay on your estate.
Get tailored advice
Whatever life stage you are at, a financial adviser can help you avoid common mistakes and create a robust financial plan that works for you. If you’d like to learn more about how our advisers can help, get in touch to arrange a free initial conversation.
This article is for generic information only and is not suggesting a suitable investment strategy for you. You should seek financial advice that takes your individual circumstances into account prior to proceeding with any course of action.