Why your 20s is a great time to kick-start retirement planning

Great-time-to-kickstart-retirement-planning

If you’re currently in your 20s and have recently started working and enjoying the taste of financial independence, retirement may feel a long way off. But, it’s important to start thinking about it sooner rather than later.

Here's why kick-starting your retirement planning early is one of the best things you can do ensure an enjoyable later life. 

Getting into the habit of saving 

Your 20s is an ideal time to establish habits that will help you get where you want to be in your future life. Joining the RPS is a great way to get you into a routine of saving. Your monthly payments are deducted straight from your salary before it’s paid to you, so you may not even notice them.

Saving into the RPS is a team effort

What’s really good about the RPS is that your employer pays contributions towards your pension too so you have more when you come to retire. Your eventual RPS benefits are based on how long you contribute to it, so the earlier you start saving, the higher your eventual benefits will be.

Moreover, you get tax relief on your savings. This means you don’t pay tax on your pension contributions - your employer usually deducts your pension contributions from your salary before it gets taxed. 

Your State Pension won’t be enough

As much as the State Pension provides a good base, it’s unlikely to be enough to live on. In addition, the State Pension age is rising for many so you might have longer to wait for it.

Saving into the RPS provides you with another income to help you do the things that you want later in life.

More time to save

Starting retirement planning while in your 20s means you have something very valuable – time. Time to get familiar with your investment options (if you are paying into a defined contribution pension) and start growing your money.  Or, if you are paying into a defined benefit pension – then you have more time to build up your benefits – it’s a win-win situation!

More choices

When you eventually decide to end your working life, you will be able to choose from a few options regarding how to take your money. You can usually take up to 25% of your benefits as a tax-free lump sum, or could forego your lump sum and receive higher four – weekly pension payments instead – the choice is yours.