How to Fund Your Retirement

Retirement is, for practically all of us in active employment, a sort of light at the end of the tunnel. It is a reward for years of hard work, and an opportunity to refocus on everything truly important to you. But the transition to life outside of work can be a tough one, in several ways – including financially.

Indeed, finances are a chief concern for those approaching retirement age, particularly at the present moment. Rising inflation in the short term has stoked fears about spending power in the long term, and the safety of the ‘triple-lock’ state pension. If you have your own concerns about putting enough aside for later life, how might you approach funding your retirement? 

Your Pension 

Your pension is the central column of your retirement funding plan, representing the biggest chunk of money and the most lucrative route to a comfortable retirement. Your employer-backed pension plan automatically takes a minimum amount from your salary, which is topped up by your employer. Increasing these contributions sooner rather than later will have a cumulative effect on the size of your pension pot, and allow you to better benefit from compound interest. 

ISAs and LISAs 

As well as directly engaging with your pension, you could also create secondary savings pots for your retirement, using either an ISA or the more suitable LISA. ISAs are savings mechanisms that offer tax relief on interest earned; easy-access ISAs have lower interest rates, but if you are willing to lock your money in for fixed periods you can benefit from higher interest rates. 

LISAs, meanwhile, offer a 25% government bonus on top of any money placed in each year, up to a £1000 limit. The catch is that the bonus is only applied when the money is used to purchase property or fund retirement – perfect for the retiring individual. ISAs and LISAs can also be used as vehicles for investment, offering tax relief on gains from stocks and shares. 

Equity Release 

Your home is likely the most expensive asset you own, and one of the more effective when it comes to value growth. But all that value is locked up in the property itself. The financial process of equity release allows you advance access to the value of your property, either as a lump sum or annuity, without requiring you to sell or vacate. You need to be over 55 to access this, and there are risks to consider, but this can be a strong way to fund bigger lump costs associated with later life. 

Other Uses for Property 

Your property can also accrue money for you in other ways, though. If you have the space, whether in the form of a spare room or an annexe building, you could rent it out. This could be a long-term lodging or tenancy arrangement, or as a holiday let on an accommodation booking platform. These are not passive forms of income but could be a welcome form of casual post-retirement work.