Expert reveals tips on how to save for retirement
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For many workers, the prospect of retirement holds the promise of doing more of what they enjoy. Whether that be spending time with loved ones or taking on new adventures, it is a wonderfully exciting time.
But planning for retirement does not happen overnight, and it can be easy for people to make mistakes which could damage their chances of retiring how and when they wish.
Romi Savova, PensionBee CEO, has provided insight as to some of the biggest and most common errors people make when planning for retirement.
She said: “As a nation, we often fail to take retirement planning seriously and run the risk of being woefully underprepared for later life.
“One of the biggest misconceptions about pension saving is that it can be put off until a later date.
Britons could damage their retirement by failing to plan effectively (Image: GETTY)
“While it’s never too late to start saving, the earlier a saver starts the longer a pension has to grow.
“Furthermore, by leaving a pension untouched for several decades, a small savings pot is likely to turn into a much bigger pot at retirement thanks to compound interest.”
While some people make the mistake of starting their pension plans too late, others neglect this altogether, believing they can rely solely on the state pension.
Ms Savova explained how this dangerous misconception could leave people short of cash in retirement.
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The full state pension currently pays an annual income of just £9,339, which Ms Savova warned is not enough for a comfortable retirement.
The state pension is only accessible from the age of 66, and this will rise to 67 by 2028.
Ms Savova said: “Savers who pin their hopes on the state pension tend to have underestimated the overall cost of retirement.
“This is one of the worst mistakes to make as it could force savers into a difficult position, where they may have to return to work or sell any assets to fund their later life.
What is state pension? (Image: Express)
“It’s crucial for savers to have a clear idea of how much they need to cover their basic living expenses and any luxuries they may take for granted today such as holidays or a new car every few years.
“Once a saver has a clear target for their retirement income, they can adjust their pension contributions and plan accordingly to achieve this.”
Another potential pitfall to avoid for pension planners is an overreliance on property investment.
It can be a common strategy for earning extra money to put towards retirement, but Ms Savova warned of the risks involved.
People may not be able to rely on the state pension (Image: GETTY)
She said: “Some savers make the mistake of over-relying on property to bolster their retirement income.
“Investing in property alone can leave savers at the whim of the property market at the time they plan to retire, so they need to be prepared to consider what might happen to their retirement plans if the market crashes.
“Should a saver be reliant on equity in their own home, it’s important to bear in mind the realities of downsizing.
“Moving properties is never cost-free, and finding a new home isn’t always easy – especially if they’re looking in a very desirable area.”