Three ways to boost your retirement fund
Lifetime financial planning doesn’t stop when you stop working
- A cash-based rainy day fund that will cover you against any emergencies and stop you liquidating other longer-term assets at the wrong time
- A portfolio of investments that will generate your main retirement income or supplement what you receive from the State, an existing annuity or property
- Funds earmarked and managed to meet specific retirement goals, such as travel, clearing debt and funding long-term care.
Make sure you are being tax effective
- Every 80p paid in by a basic rate taxpayer becomes £1 invested thanks to tax relief given by the government
- Every 60p paid in by a higher rate taxpayer can become £1 invested thanks to basic rate tax relief and the ability to claim further relief at 20%
- Money invested in a personal pension fund can grow free of income tax and capital gains tax whilst it is inside a wrapper such as a Self Invested Personal Pension (SIPP)
- Once you reach the minimum pension age of 55 you can withdraw up to 25% of the total fund tax-free.
- Your assets have longer to grow
- You are not drawing on your retirement fund as quickly
- You can carry on contributing beyond the earliest retirement date.
Whatever you decide to do to boost your retirement fund, avoid taking chances with your asset allocation in the run up to stopping work. The reason is that if you take short-term investment risk, by switching your money out of relatively safe assets, you open yourself up to the possibility of a big hit should the market dip; years of careful saving could then be cast off in the quest to find a quick boost via excessive risk-taking, which would be a bad idea.