If you are reading this, you probably already realise the State Pensions 164.35 per week isnt going to be enough for you to live on comfortably in retirement. Youll probably need to supplement this with other funds if you are to stand a good chance of retiring with plenty of money.
The good news is there are several ways you can turbocharge your retirement savingsby selecting the right investment vehicle in the first place. So Im going to draw on the philosophy of the martial art of judo to illustrate the point.
One of the main principles of judo is to use the strength of others to gain an advantage, and I think this is key to getting the best performance from your retirement savings.
How to use the strength of others to help you save
Its best to save with the help of others. In a judo match, one person tries to defeat the other by using his or her opponents own weight or strength against them. For example, if your opponent attacks, you would use the momentum and energy of their attack to assist you in throwing them to the floor!
The basic idea is that you get all the help you can, so that winning isnt down purely to your own strength. And in a similar way, you can save like that too so what you accumulate is not down purely to the money you put in.
One way of doing that is to join your employers Workplace Pension Scheme, if you have an employer that is. Doing that will count as financial judo in two exciting ways:
- Your employer will usually help you save by adding between 3% and 10% of your annual salary ON TOP of what you pay into your pension yourself.
- All contributions from you and your employer will be free of tax, so thats often at least another 20% that will be added ON TOP of what you and your employer pay in.
Taking advantage of your employers Workplace Pension Scheme is smart financial judo! Another smart move is to take full advantage of a Lifetime Individual Savings Account (LISA) or a Help-To-Buy ISA if you meet the age and other criteria. Doing that will count as financial judo in two more brilliant ways:
- The government will add an extra 25% to what you save in at least one of them.
- All the gains in your ISAs will be free of tax.
The big boost from tax-relief judo
If you dont have access to any of the above smart saving vehicles you can still put money into a personal pension, or a Self-Invested Personal Pension(SIPP), which will give you tax relief on the money you pay in.Or you can take advantage of your annual 20,000 general ISA allowance, which means all your gains inside the ISA wrapper will be free of tax. This will be a big boost to your savings. Within an ISA, you can save cash or invest on the stock market. At The Motley Fool,we believe that share-backed investments will likely serve you well over the long term just because they have outperformed all other major classes of asset in the past.
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The report is entirely free and available for download today, so if you’re interested in exiting the rat race and achieving financial independence, click here to download the report. What have you got to lose?
