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How to Make the Most of Your Pension

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Saving for retirement is extremely important, especially if your employer does not provide a pension savings plan. Once you retire, you will no longer be making an income and as result, it is important that you make the most of your pension contributions. In order to get the most out of your pension, you need to save money for your retirement, invest your money, and manage your finances.


Saving for Retirement

  1. Increase the amount you are saving for retirement.The best way to ensure you will have enough money to retire, is to increase the amount you are saving. If you have any additional income that you are saving consider putting it into a pension fund. This is one of the most tax efficient ways to invest your money and it will likely make more interest than sitting in a savings account.
    • For example, if you live in the United States you can put money into an Individual Retirement Account (IRA).
    • Alternatively, if you live in Canada you can put money into a Registered Retirement Saving Plan (RRSP).
  2. Contribute as much as you can to your pension.If you have a personal pension, you should always contribute as much as you can annually. Similarly, if your employer offers a pension make sure that you opt in to the pension and make yearly contributions. In some instances, your employer may match the amount you contribute, allowing you to earn more money for your pension.
    • For example, if you make ,000 (USD) per year and can contribute 5% of your income to a pension, your employer may contribute an additional 3%. This means your employer would be contributing 0/year.
    • If you are unable to contribute to your pension, that allotment may carry over to the next year depending on the rules in your jurisdiction.
  3. Claim all of your tax relief.Depending on the rules and regulations in your jurisdiction, you may receive tax relief for contributing money to your pension. Make sure that you claim this yearly on your taxes. By doing this, you may be allowed to make even bigger contributions.

Investing Your Pension

  1. Review how your pension is invested.It is important to know and understand how your pension funds are being invested. For instance, you may have a workplace defined-benefit pension. In this case, your employer will be responsible for deciding where and how to invest your allocated pension.
    • Alternatively, you may have a defined contribution personal or workplace pension. In this instance, you get to determine what type of investments you want to make with your pension.
  2. Choose risky investments.If you have a defined contribution pension and you are still aways from retiring, you may want to take on risky investments. As a general rule, you can afford to take more risks with your investments when you are young.
  3. Make low-risk investments closer to retirement.If you are over the age of fifty and planning to retire within the next ten years or so, then you should place your pension into low risk investments. Low risk investments, such as cash and bonds will make a steady and consistent amount.
  4. Try self-invested personal pensions.You can also consider a self-invested personal pension (SIPP), which gives you access to a larger range of investment options, however, these can have higher charges than other pension options. This can be risky if you do not know a lot about investing in the market.
    • Alternatively, you could hire a financial expert to manage your investments.
  5. Determine your management fees.If you have a personal pension that is self invested, you should look to see how much you are paying in management fees. Compare the amount you are currently paying with other pension companies. If you find a company with cheaper fees, you may want to consider switching companies.
  6. Diversify your investments.Do not invest all of your pension into one highly specialized fund. This can be extremely risky because that fund may dip causing you to lose a lot of money. Instead, you should diversify your investments. This can be done by placing your money in a variety of highly specialized funds or by investing in one well managed and diversified fund.

Managing Your Retirement Finances

  1. Seek professional financial advice.It is always a good idea to talk with a financial adviser about how to save and invest for your retirement. This is especially true if you are investing a large sum of money, or if you are not confident in your knowledge of the investment market.
    • A professional financial advisor can help guide your investment decisions and explain to you exactly how your pension is being invested to ensure you have enough money for retirement.
  2. Consider merging multiple pensions.If you have worked at a number of different companies throughout your career, then you may have more than one pension scheme. You may want to consider consolidating your retirement accounts. This will make it easier for you to review and manage your pension.
    • As a general rule, it is a bad idea to pull out of a defined benefit pension scheme. Before combing your pensions make sure you are not losing out on any benefits.
  3. Calculate the value of your state pension.Some countries provide a state pension, which you contribute to throughout your working career. In order to know how much money is in your state pension, you can use a calculator that is often found on government websites. This will help you know how much money will be available to you upon retirement.
    • If you live in Canada calculate your pension here:
    • If you live in the United Kingdom calculate your pension here:
    • If you live in the United States calculate your pension here:

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  • Educate yourself on different retirement savings plans and find a plan that works best for your particular financial situation.
  • It is never too early to start saving for your retirement.

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Date: 05.12.2018, 06:35 / Views: 65373