The Tax Advantages of Investing for Retirement
If there’s one thing that most people can’t wait to do, it’s retire. Whether you’ve just started your career, or if you’ve been working frantically for the past fifty years, there’s nothing quite like the promise of a retirement. So what do you have planned for your retirement? From purchasing a property abroad and enjoying the rest of your days in the sun, to selling the family business and living off of the interest, your retirement plans are about as important as living life itself. So that’s where the benefit of investment comes in handy. Fortunately, once national insurance, income tax and any other fees are covered, what you earn is your own and it’s this tidy sum of monthly cash that you should consider investing for your future, but why? Well we’ve all heard about that dreaded pension tax, but how does it really work?
Well the first thing that you’ll have to bear in mind is that although you’ve been paying in to your retirement fund (via a company or individual payments), when it comes to receiving your pension once you hit the age of retirement, you’ll also have to pay the taxes that come with it. This means that although you’ve been paying taxes your entire life in the hopes of accumulating a large enough pension to live happily afterwards, the government will still charge you a fee for your pension fund.
There are ways around this of course, especially if you’re concerned that your pension won’t cover your living expenses, including after the tax has been deducted. If this sounds like the situation that you’re expecting, then why not consider investing your current savings? The great thing about most investments is that you won’t be charged for them. This means that you could invest in a small property, convert it and then sell it on for maximum financial gain.
As the cash for your investment has come from your own savings, you’d have already paid the required income and national insurance fees, leaving your earnings unscathed from this point onwards. Another benefit of investing is that your money will either be looked after by a professional, or it will look after itself.
Don’t risk your money on unstable investments; aim for long term returns like homes and businesses. Try to avoid lending money as this will put your finances at risk, especially if your lending hasn’t been guaranteed a return. It’s probably safe to assume that your pension will cover your living expenses, but just in case it doesn’t, don’t lose out on the potential to make even more money, especially if you have extra savings laying around for a rainy day.
This investment could be the difference between you struggling to make ends meet on a low pension, or having an extra influx of cash that you can spend on whatever you want in the future.