The 3 Best Ways to Invest Your Money for Retirement

Sun, Dec 1, 2013

Financial Advice, Investment

Do you feel financially secure about your retirement? Experts go on and on about setting up a private pension in order to save a hefty nest egg. The fact of the matter is that we can’t rely on the State Pension as a viable source of income when we quit work.

At present, the state pension is £110.15 a week but it increases every year. This is based on 30 years’ worth of contributions or credits to get the full basic amount.

This isn’t a lot to live on though, therefore it is crucial that you set up some sort of alternative investment.

But where can you capitalise your hard earned cash? Which are the best resources to give you the greatest return? Here are the 3 best ways to invest your retirement money:

  • Property

One avenue you can invest in is property. House prices are expected to rise by a third in the next five years as the average cost of a house increases by £43,000. If you have enough money for a deposit, one option is to buy to let.

The house price boom is the perfect answer to invest your money now. You can sit back, wait for house prices to rise, and then sell the property and make a profit. Obviously your age will affect how much money you can borrow but it is a great way to get a good return. Houses will always sell- it’s just a matter of when.

  • Stock market

There are high risk and low risk stocks. If you plan on retiring in 30 years’ time, you can afford to put your savings in a high risk, aggressive investment. The stocks will go up and down but you have some time to go until you plan to take your investment back so you can afford to take a gamble.

Here are the best stocks in the UK. By the time you reach 60-years-old, you should really only have around 20% of your money in high risk stocks.

Now there are bonds however according to research from Ibbotson Associates, the stock market returned on average 9.8% between 1926 and 2009, in contrast to just 5.4% for bonds.

  • Lifetime annuity

If you have a private pension fund, you have the option of buying a lifetime annuity. Fundamentally, it is a way of transforming your pension pot into a guaranteed income for the rest of your life. How much you get depends on how much money you have saved, the annuity rate and your age/health/lifestyle.

Please bear in mind that the income from an annuity is taxable and it’s important to shop around because you could get up to 20% more income per month if you do your research.

What’s more, some providers require a minimum total pension pot; for example with Nationwide it is £18,000. Most people choose a non-invested lifetime annuity because it is less risky. You are paid a guaranteed level of income until the day you die but there is no option of future investment growth on your pension pot and it remains fixed throughout your life.

Here are some recent examples of non-invested annual lifetime annuity rates:

  • Saga- £5,784
  • Aviva- £5,436
  • Canada Life- £5,280
  • Legal & General- £5,280
  • Prudential- £4,968

So there you have the 3 best ways to invest your money for retirement. Some of them you may already be doing, others you may not have heard about. What matters is that you start saving as early as possible in order to build a substantial nest egg.

Remember though- your retirement money should not be gambled with so don’t make any precarious decisions before consulting with a financial expert. Do you want to put them in safe investments and get a guaranteed low rate of return, or do you want to risk it for a sizeable fund?

This article was provided by Cheselden, the UK’s leading independent authority on NHS Continuing Care.



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