We could all be forgiven for putting our pension and long-term savings on the very long finger. We’re either pinching pennies to save for a deposit, calculating how many more years we’ve got left on our mortgage or wondering how we’ll ever be able to put the next generation through college if university fees come back into play.
However, you really can’t afford to disregard the importance of looking after your future self. Particularly as we’re members of the Celtic Tiger collapse, where our parents poured their savings into bricks and mortar, we’re much more wary of multiple loans and have witnessed the state of flux in the housing market. So then there’s the question of “well, where do I put my money then?”
Here are the savings you need to be making at every age so ensure that come retirement you have a handsome little sum.
In Your Twenties and Thirties …
- As soon as you start earning a living wage, open a pension account. You don’t have to be piling money into it, but just put a small, consistent amount in every month. You get complete tax relief on it (unlike other investments) so for every €100 you pay into it, it’s actually only costing you half that.
- Be consistent. Aside from being worthwhile to get you into a saving mindset, when it comes to applying for a mortgage, a bank will like to see you being dedicated when it comes to your future.
- Consider investing in stocks and shares. These can be left long-term and while there are risks involved, they’re also high-yield and ideal as a long-term investment.
- Rather than lumping all your savings into one account, use separate savings accounts for your different needs. By naming them for their purpose – for example, holiday fund, rainy day fund, down payment fund – you will be less likely to dip into them for other reasons.
- Be active when it comes to saving. Move the money over as soon as you get paid rather than waiting until the end of the month to see what’s left over.
In Your Forties and Fifties …
- Meet with an independent financial advisor. They’ll be able to tell you where you should invest based on your income and work-life expectancy.
- Start seriously considering how much you want to pay into your pension, particularly as your children get older and cash begins to free up. This is the peak of your earning years so take advantage, increase the amount you pay in every month.
- Consider bulk-paying your existing loans, particularly ones that you feel won’t be completed before you retire. Even if it’s a few hundred euro, it will reduce your loan time and also the amount you’re paying in interest.
- Begin consolidating your savings, talk to an advisor about shoring them up so they’re completely watertight.
In Your Sixties …
- It’s time to make a move toward lifestyle funding. Now that you’ve invested into your long-term savings, you need to begin moving them to secure, watertight funds that can be easily accessed. Often long-term savings have a long notification period so you want to have those funds freed up before you actually need them.
- Move from stocks and shares to gilts and bonds. It won’t be as good a return but it’ll protect it from stock market crashes and will ensure it’ll be there when you need it.
- Divert 20% of your pension into really safe stocks so that you can still have some growth but the necessities are safe. Most pension providers will do this for you for free.
- Consider setting up a long-term holiday fund so that when you retire, you have an existing stock of savings that you can immediately take advantage of.
To find out more about setting up a savings account with the savings specialists, RaboDirect visit RaboDirect.ie or call 1850 882 244