Planning

Planning for retirement in your 30s

18 November 2020 | Posted by Henry Collie
couple in a field

Retirement in your 30s can seem so far away, but if you want to kick back with a decent sum, you’d better start saving now.

According to the Money Advice Service:

‘…only one in eight working-age adults claim to have done a great deal of retirement planning…while one in five [45-64 year-olds] admit they have no plan at all.’

Research from the Center for Retirement Research found that, if millennials and gen Xers don’t start saving now, they’ll to have to reduce their living standards in retirement by 25%.

But, you could just settle for a state pension, right?

Don’t mention the state pension

If you’re under 42, you may not hit retirement until you’re 68; the UK government may raise the state pension age in 2046. Plus, thanks to medical advances in the next thirty years, you may find yourself living for another 20 – 40 years after retirement. No matter how invincible you feel right now, you’re likely to need a pension. 

On the UK’s new State Pension, you’ll receive the princely sum of £175.20 per week.

Yup, that’s it. Good luck buying anything other than the most basic supplies.

To retain a decent standard of living, you’ll probably have to continue working well into your golden years—unless of course, you start saving money for retirement now.

How to start saving for retirement in your 30s

There are several simple actions you can take, right now, to save for a decent retirement in your 30s.

1. Start budgeting

You can’t save if you don’t know how much you’re spending. Set up a budget today, and work on it for the next month. By the end of the month, look at where your money goes and find ways to divert funds into saving money for retirement. If you’re not sure where to start, you’ll find plenty more articles around our website. 

2. Fix your spending habits

We all develop bad habits over time, but overspending is up there with the worst of them. If you’re guilty of spending too much money, try to change your spending habit into a saving habit. Check out our article 6 Ways to Change Your Spending Habits for some easy ways to fix bad habits. 

3. Increase your contributions

Auto-enrol workplace pensions are great tools, but you could probably afford to add more than the default minimum. Even raising your monthly contribution by £20 per month could help you to earn thousands of pounds more in compound interest. 

4. Get an ISA

Government-backed ISAs come in many shapes, and they are great investment options for specific goals. ISAs have been around since 1999 and they allow you to invest tax-free up to a set amount (known as the ISA allowance, currently set at 20k for the tax year 2020/2021). Lifetime ISAs, for example, allow you to invest up to £4,000 tax-free and, on top of that, the government will award you a 25% bonus, up to a maximum of £1,000 per year. That is £1,000 of free money.

Investing in a stocks and shares Lifetime ISA may get you even better returns, although your capital is at risk – unlike cash Lifetime ISAs. Plus, any profit you make from a lifetime ISA is 100% tax-free. 

The general rule of thumb is to accept higher risk in your youth, and gradually taper off into less risky investments, as you get older. But how do you find the best places for your money? 

5. A financial coach can help you achieve retirement in your 30s

You’d hire a personal trainer if you wanted to get fit. Even professional footballers have a football coach. So why not do the same for your finances?

A good financial coach can help you to achieve your goals, such as retirement in your 30s. Financial coaches are fully qualified, friendly people who are there to share their expertise, answer your questions and support you to learn and practice. Just like any coach, they can’t do the work for you (kick the ball or lift the weights) but they can help you build healthy financial habits and support you in making decisions about your money when you’re ready. 

Where can you find a financial coach? That’s where Claro comes in. On our app, you’ll be able to book a video call with a financial coach at a time that’s good for you. They can help you understand your spending habits, and work with you to set your own saving goals and achieve them. Sign up to our waiting list for early access.

When investing, your capital is at risk.

6. Speak to a financial adviser

If you have enough assets—typically over £100k—you might want to get in touch with a financial adviser.

You can save for retirement in your 30s

Aubrey De Grey, who leads the field of anti-ageing research, believes that the first human to live to 1,000-years-old has already been born. That may be a stretch, but the fact stands that humans are living longer. 

It doesn’t matter if you’re 18 or 50. If you want to reap the maximum benefits of saving money for retirement, you need to start now—like, right this second.

To learn more about taking control of your finances, check out more financial planning articles on the Claro website. 

Key takeaways

  • Save for retirement in your 30s now or you may have to work through your golden years.
  • The UK state pension is only £134.25 per week.
  • Returns on government-backed ISAs are tax-free.
  • Keep a budget, so you know where your money’s going.
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