Expert reveals tips on how to save for retirement
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Early retirement is likely to be a goal for many of those keen to depart from the workforce, however, it can be difficult to achieve. This is because it often requires additional funds so a person can support themselves for longer without a salary. However, an expert has warned there is one important “secret” to bear in mind if a person is hoping to retire early.
The advice could even be useful to individuals who have already retired, but are hopeful to boost their retirement cash.
Becky O’Connor, Head of Pensions and Savings at interactive investor, said: “Could you retire early? Why not find out if this aspirational goal could possibly be within your reach.
“If it is, consider ploughing some of your retirement money into ISAs, too.
“ISAs are the secret to an early retirement.
“This is because you can access these before your Normal Minimum Pensions Age (NMPA).
“Income from them is tax-free. There’s a £20,000 a year ISA allowance.”
ISAs were first introduced back in April 1999, and have explosively grown in popularity ever since.
Formally known as an Individual Savings Account, it offers tax-free interest payments, a huge incentive.
State pension alert: You may have to retire later – DWP review [INSIGHT]
Pension warning as Britons could be clobbered by ‘scary’ tax code [ANALYSIS]
Top side hustles for a ‘wealthy’ 2022 – ‘earn extra £1600 every month’ [UPDATE]
As Ms O’Connor highlighted, ISAs could be suited to a wide range of people, but could help progress individuals towards retirement goals.
When it comes to saving in this manner, there are four types of ISA a person could choose.
- Cash ISAs
- Stocks and Shares ISAs
- Innovative finance ISAs
- Lifetime ISAs
People will be able to put money into one of each kind of ISA every tax year, and the maximum saved is £20,000.
To open a cash ISA, people must be 16 or over, but 18 or over and under 40 for a Lifetime ISA.
The age is 18 or over for a stocks and shares or innovative finances ISA.
Eligibility rules mean people must also either be resident in the UK, or a Crown servant.
Individuals will not pay tax on interest on cash in an ISA, or income or capital gains from investment in an ISA.
The savings account is available from many places such as banks, building societies, credit unions and stock brokers.
However, Britons should also bear in mind the rules of withdrawing their money, especially if their intention for doing so is an early retirement.
What is happening where you live? Find out by adding your postcode or visit InYourArea
People will be able to take their money out of an ISA at any time without losing any tax benefits.
But certain providers could have rules or charges for making withdrawals, so it is worth checking the fine print.
The Government website explains: “If your ISA is ‘flexible’, you can take out cash then put it back in during the same tax year without reducing your current year’s allowance.”
Providers will be able to offer information on whether a person’s ISA is flexible.
Ultimately, it is about choosing an option which suits someone’s individual circumstances, which is why many people choose to seek financial advice.
Professionals can often offer tailored guidance to help budding retirees navigate their way through this transition.
Ms O’Connor concluded: “Like so many things in life, there’s a lot about pensions that no one tells you. You then end up finding out too late or even not at all.
“It’s hard to know what you don’t know, but with a little more understanding you might end up with a lot more in retirement.”
Source: Read Full Article