How To Save for Retirement in Your 50s and 60s

When saving for retirement, we will all have different views on our preferred approach based on our personal experiences and circumstances, current assets, expert advice and so on. Our financial requirements in retirement will also have a significant impact on our preferred approach, but ultimately, saving for retirement is about creating wealth and having sufficient assets available to us to see us through this exciting period of time.

There are many ways of accumulating wealth for retirement which tend to focus on the traditional options such as pensions, property, investments and so on. The key to this is diversification and not to ‘put all of your eggs in one basket’, as different assets behave uniquely depending on economic factors at the point of retirement.

The best ways to save for retirement in your 50s and 60s

There are areas we believe you should focus on when saving and maximising your retirement nest egg in your 50s and 60s, and accumulating benefits. Here we break them down for you.

Maximise tax allowances

As individuals, we all have allowances available to us to help save for the future in a tax-efficient environment. If you are in a relationship, you may also be able to maximise the use of more than one allowance which will help increase the retirement provision of your household.

Pension contributions

To encourage us to save for our retirement, the Government provides tax relief on personal contributions paid into a pension scheme. The amount of tax relief available is typically based on your income in a tax year and most commonly the higher of £3,600 per annum or 100% of earnings, capped at £40,000pa -this is called the Annual Allowance and may be lower in certain circumstances.

If affordable, you may wish to make full use of your annual pension allowance in a tax year and maximise your pension funding. The tax relief available will depend on your tax status in the respective year and will range from 20%-45%. So, in essence, for every £100 you pay into your pension, it will cost you between £80 and £55 and is therefore extremely tax efficient.

In addition, if you are enrolled in a workplace pension scheme, your employer may offer the ability to pay pensions and bonus’ into your pension pot through a salary exchange scheme. This reduces the cost of paying into the pension further due to National Insurance Contributions (NIC) savings for both you and your employer.

Once you have fully used your Annual Allowance in the current year, you may be able to ‘carry forward’ any relief from the previous three tax years that remains unused.

ISA Investments

Many of you will be familiar with Individual Savings Accounts (ISAs) which have been available since April 1999. The amount we are permitted to save into our ISAs has changed over the years, and is currently £20,000 per annum.

An ISA provides a tax-efficient wrapper to invest each year as any gains are free of Capital Gains Tax (CGT) when you decide to withdrawal the capital. This represents the opportunity to save and invest a considerable value over your lifetime and it should be the starting point when you wish to invest in an asset that is readily accessible if needed (unlike pensions when under age 55 and potentially property).

There is a great deal of flexibility with regards to how you invest your ISA from cash through to specialist equity funds, depending on your own circumstance and objectives.

Review Existing Investments

You may have built up significant assets throughout your working career, but how often do you review how the assets are invested? Over time your outlook on investments will change, and typically as we get closer to retirement, the level of risk we are prepared to take reduces.

There is, however, a fine line between taking appropriate risk and being too cautiously invested with potentially many years ahead of work and retirement. This means that you need your assets to continue to grow to protect your investments from the effects of inflation and protect the buying power for the future.

The availability of helpful online tools is ever increasing which can be used to help us monitor and review investments. However, you should be honest with yourself and ask how comfortable you are making changes to what you have accumulated. In addition, what time do you have to take this action? For many, the thought of reviewing investments is often at the bottom of the ‘to-do’ list after a long day or week.

With enough discipline and time, this may be something you feel comfortable addressing and may well indeed do so already. However, if this is not something you feel comfortable in doing yourself, the services of an investment specialist or Independent Financial Adviser should be considered.

The content contained herein is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or any other advice.

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