How To Plan For A Comfortable Retirement

If you want to enjoy a comfortable retirement then you have to put money away while you are still working. There are a number of different ways in which you can do this, each with their own advantages and disadvantages. Here, we shall discuss the various options in turn so that you can decide what is right for you.

Option One - Under the floorboards.

The traditional miser's way of saving for the future, keeping all your money hidden in your house, made something of a comeback recently in the wake of the global financial crisis. With banks going bust on what seemed like a weekly basis, many people began to question whether financial institutions were the safest place to deposit your life savings, and sales of safe deposit boxes went through the roof. While keeping your life savings hidden in your house offers you a certain type of peace of mind, it does leave you somewhat exposed to the risk of inflation, not to mention burglary. It's not really a practical option!

Option Two - Savings.

When it comes to saving your money, you have a lot of options, ranging from instant access card accounts with low rates of interest to savings accounts which offer higher rates of interest but have more restrictions about how much you can put in or how quickly you can take it out. Probably the best rates can be found with Individual Savings Accounts, which allow you to put a certain amount of money away each year tax free. There are two types of ISA available - cash, and stocks and shares. With a cash ISA, you can put away a maximum of 3,600 GBP per year, and your investment is guaranteed not to lose value. Stocks and shares ISAs offer a higher, yet riskier return on your investment.

Option 3 - Pensions.

Traditionally, pension plans have offered the best return on your investment, although their reputation has taken a battering in the wake of the credit crunch. Pensions are entitled to significant tax breaks, and most well run funds tend to outperform savings accounts over time, although they are a little riskier.

Option 4 - Spread Your Bets.

The best policy is to have several investment schemes in place, including risky and safe bets, so that you can be sure that even if one savings scheme underperforms, it will probably be made up for by the others. With personal finance, it's better to be safe than sorry.

Remember, you will be able to enjoy these savings during your retirement, and although it is not a subject anyone likes to talk about, they can also be used to pay for your funeral costs and to look after the people you leave behind once you've gone. It is also worth protecting yourself if you are diagnosed with a critical illness so that you don't need to spend vast sums of your savings on treatments and care. Legal & General offer critical illness cover from as little as £6 per month - more information on the type of critical illnesses which are covered can be found online so it could be worth investigating.

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