Where Should I Invest Money for my Retirement?

Years ago people would either rely on a government pension or pay into a work or personal pension for their retirement. However, lately there has been more of a distrust in pensions, due to the fact that some pensions companies were unable to pay out due to poor investments and others which did not pay out as much as expected. This has led many people to think about alternative options for their retirement.

Work pension

In the UK employers have to provide a pension scheme for their employees. Work pensions are often very good, with tax relief being given on payments into the scheme and employers often adding money in as well. These can be good and provide many people with a decent income into their retirement. Some people are nervous of them as there are some companies that have collapsed and the pension schemes collapsed with them. However, most are still a good way to save up for retirement and so it is worth investigating what your workplace has to offer. If you are unsure, then talk to a financial advisor about them and also do some research about your company to find out more about them and how secure they are likely to be in the future.

Personal pension

A personal pension is similar to a work pension in that it is designed to provide a retirement income. Tax relief is still given on payments into the scheme, but without an employer paying in as well it is unlikely to be as good. It can still provide a consistent income in retirement though. These have collapsed in the past as well and so people can be reluctant to use them. However, it is worth finding out more about them and what protection you might get if the pension provider did collapse for any reason. You may find that they are a large company and this is unlikely or that there is some legal cover that they have which could protect you. Again, a financial advisor would be able to help you out with this.

Buy to let housing

Many people are turning to different types of investment for retirement due to a lack of faith in pension schemes. This means that many put their money into houses which they rent out for profit. Although this can bring in income, it is not guaranteed. The income is dependent on the house being rented. There are also expenses such as the maintenance of the property, safety checks, insurance and letting agent fees which have to be paid. If the house is paid for outright, then these can be covered by the rent but if the house is purchased on a mortgage then the rent may not cover all of the costs and so may not be a good income.

Stock market

Some people choose to buy shares and hope that the stock market does well so that they can get an income from their dividends. This income will depend on how well the stock market is performing but will also only be a decent income if the investment is big. It is wise to only start investing in the stock market if you have a lot of knowledge about it. You need to be aware that you will pay capital gains tax on profits that you make and you will have to pay fees when you trade and so this has to be taken out of any profit that you make.

Managed funds

Managed funds are where you invest money in funds which are managed by a fund manager to ensure a good return. Although a fund manager will take a percentage of the return, it can be a better way to earn than speculating on the stock market if you do not know much about it. These can be set up to pay an income, but it again will depend on how much you can afford to invest, as to whether you make a decent income from it.

Premium bonds

Premium bonds are a very safe place to put money. They are a government backed scheme where you buy bonds and they get entered into a monthly draw where you have a chance of winning various prizes of different values. As this is like a lottery, there is a chance that you will never win anything and those with more money will always win more. However, many people enjoy having a gamble and the fact that they can get free tickets each month without any loss of their money, feels rather like a great alternative to a lottery. Odds of winning are low though and the equivalent percentage interest is small.

Savings

Savings accounts do not pay out much interest these days. Therefore if you save in one for a long time, it is unlikely that you will build up much in the ways of funds. However, it can be a safe way of accumulating money. When you do retire though, you could soon get through these fund if you are using them instead of an income and so it can be wise to think of something else as you do not want to risk running out of money during your retirement. However, having a nest egg to fall back on alongside an income, can be reassuring.

So as you can see there are lots of options for funding your retirement and these are just a few of them. It is worth thinking about retirement income as soon as you start earning money. The sooner you put money away into a retirement fund, the bigger the fund can build up and the better income you will get. When very young, you may feel like retirement is too far away to worry about or think that you may not make it that far. If you are concerned then you could use an alternative method to make money that is not a pension and then you money is not tied up into a scheme that you do not use or take advantage of.

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