Pension Advice For Young People – 20 Somethings

Pension Advice For Young People - 20 Somethings

Pension Advice For Young People – 20 Somethings. When you’re in your early 20’s, trying to figure out how to pay off your student loans or looking to scrape together as much cash as you can for a house deposit are often higher on your agenda than looking for a pension. Thinking about retirement is probably the last thing on your mind. Even so, making some provision at an early age for your pension can pay off big time later on.

After leaving college or university and landing your first job, a company or workplace pension may be the first step on the pensions ladder. To most, it’s a sum of money that is taken from their salary, paid into a scheme and that’s about as much attention as it’s given. After all, retirement is a long way off – a lifetime away, especially considering the debts you may have incurred getting even this far.

Pension Advice For Young People – 20 Somethings

If you’re in a workplace pension it can all be taken for granted, except perhaps for the amount taken each month to be invested. For a young person trying to make ends meet or looking to get on the property ladder, every penny counts. Quite quickly, a pension can seem a low priority and become neglected.

Here are a few tips to help put your initial pension plan involvement in perspective with longer term pension and retirement planning.

1. Time is on your side, but don’t take it for granted

The most important thing to remember is that while you are young your most powerful investment friend is TIME.

Investing a little money today and ensuring it is topped up each year to keep pace with the cost of living, can lead to substantial rewards at retirement age. Even better are schemes where your employer matches your contribution.

Take a look at the table below. It’s based on a regular monthly investment over 40 years.

Young person pension planning

(Figures used for illustrative purposes only.)

However, leave it 10 years and there’s a huge difference.

young person retirement planning

(Figures used for illustrative purposes only.)

It might be tough in your 20’s to commit to £300 pounds per month to a pension fund, especially if it’s a significant portion of your salary. Not so hard though if your employer is contributing. Also, don’t forget, when you are young, your career expectations are high and so £300 per month may not be such a big deal a few years down the road.

If you can’t take advantage of a workplace pensions scheme, look at some of the Tax Free ISA’s available today. We’d be happy to help point you in the right direction.

2. Set yourself some goals.

Look to clear your debts as soon as you can, but don’t neglect your long term savings planning. Enrolling in a company pension plan, or as many will be faced with in the coming few years – not opting out, can make things easier. This is especially true if the employer matches your contribution – it’s free money. Automatic deductions make the process simple and easy to plan for.

 Do some simple spreadsheets to figure out when you are likely to clear any early student loans and then look to the kind of lifestyle you may hope for when you retire. At this stage it’s really just ‘roughing out.’ Getting any plan together at this point is better than no plan at all.

3. Take advantage of your career salary curve

Simply put; as you get natural pay rises through career progression, increase your investment proportionally.

While one million pounds in a pension pot in 40 years sounds great, the real value of that one million is likely to be less that £50,000 in todays terms. Once you realize that, the value of regular contributions that keep pace with inflation and take advantage of your salary curve becomes so much more important.

Pensions and retirement planning in your early years can seem a little daunting or of little importance. We can help you put your early investment priorities into perspective and get you off to a manageable start.

Find one of our branches near you and make an appointment to speak to one of our advisors.

Further Reading:

Planning For Retirement – Our Advice Service

The Pensions Regulator

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