What Are The Best Ways To Ensure Your Pension Will Cover Your Living Costs?

May 20, 2016

Money

When it comes to planning for your retirement, one of the biggest challenges is ensuring that your pension will cover your living costs. After you retire, you could have over 25 years that your pension needs to cover. This means that you’ll need to ensure you have enough savings to keep you going.

 

elders

Picture link

Start a pension early

The most important thing when it comes to saving for your retirement is to start your pension as early as possible. The sooner you get your pension set up, the better, as you’ll have longer to pay into it. It’s recommended that by the age of 25, you have a pension in place. That way, you’ll have plenty of time to build up your savings. The more you save a month, the quicker you can build your pension. However, even if you can only afford a small amount, it’s better than nothing.

Look at all the options

When it comes to getting your pension organized, it’s crucial to look at the various options. It’s important to compare your options so that you can select the one that will work best for you. The most popular choice for pensions tend to be private, and state pension schemes as these are the most well known.

However, they’re not the only option; you can also opt for an annuity or a superfund. An annuity is a good option as it allows you to pay an insurance company your savings. Who then add to them and pay you a set amount each month, like an income that you would get from working. Another option is a superfund which is a scheme that your employer pays into each month; you are also able to add to it. To find out more, check out this self managed super fund advice and get to grips with what’s involved in this option.

Ensure all debts are paid

accounting

Photo source

It’s not just about saving money for your retirement; it’s also important to ensure what you have to pay each month is not a large amount. The best way to do this is to pay off all your debts before you hit your retirement, that way you won’t have to stress about using your pension to pay them. If you have debts that need paying off once you’re no longer working, you will most probably end up struggling with your finances.

Clear your mortgage before retirement

If you’ve got a mortgage, it’s essential that you get it paid off before you retire. Else, you’ll end up having to use a huge chunk of your pension each month to pay it. This will most likely leave you short of money and make keeping on top of your bills a nightmare. Your retirement is a time that’s meant to be enjoyed, which is why it’s best to get your mortgage paid off so that it’s one less thing to worry about.

If you want your twilight years to be enjoyable, not stressful, it’s crucial to take your pension and finances seriously.