Back in 2013, banking giant HSCB launched a global investigation into the so-called failure to save. This canvassed the opinion of more than 15,000 respondents across 15 countries, while the results highlighted that although the average length of retirement lasted for 18 years residents were typically only able to save enough money to sustain them for 10.
This is best embodied in the UK, where the cost of living continues to soar at a a rate that is disproportionate to earnings. A state pension in the UK is also worth just £115 per week, which is hardly enough to maintain a viable lifestyle after years of work.
Why you should start saving now for your retirement and how to do this
This underlines the importance of saving for your retirement, while it also underlines the fact that you can start this process at any time in your life. In fact, the earlier you start the better, as this affords you a longer period of time to accumulate wealth for your future. This also has additional benefits too, as it eases your financial burden and leaves you with more disposable income as you save smaller amounts each month.
The other benefit of starting your retirement fund early is that it enables you to tap into commercial resources, as you invest in contributory workplace pension scheme where your employer is compelled to make regular, monthly deposits.
How Should you save for your retirement?
In addition to contributing through a workplace pension scheme through your monthly salary, you should also look to make independent deposits into an external savings account. After all, workplace pension contributions are taken directly from your salary before it hits your bank, so you should still have enough disposable income to save more.
Cash ISA’s offer the best vehicle for pension savings, as they offer variable interest rates and do not charge you tax on the interest that you accumulate This is great news if you are among the demographic of higher-rate tax payers, as this helps you to avoid a levy of up to 40%.
Additionally, you can also explore National Savings and Investment accounts, which are government-backed options that offer tax-efficient benefits for those saving towards their retirement. Offering a high, fixed rate, they are easily accessible accounts that help you to estimate precisely how much you can earn in any given period.
The Bottom Line
Regardless of the savings vehicle that you use or the taxation laws of your country of residence, the bottom line is that it is never too early to save for your retirement. If you need further convincing, remember that compound interest is calculated on the accumulated interest of previous time-spans, so saving $1,000 at the age of 30 (at a rate of 4%) can deliver a return of just under $4,000 by the time you reach 65.
This is a stark reminder of the importance of saving and the need to be proactive and start early!
The results can be somewhat stark. For example, if someone invests £1,000 into a pension when they hit the age of 30, after 35 years of investment growth at 4% per year, that amount will become just £3,950 when they hit 65.