Plan for your retirement! And a Wealthsimple UK review

I can’t begin to emphasize how important it is to plan for your retirement. And your financial future in general. Considering the state of the economy in general, and how indebted our governments are, counting solely on a pension cheque to retire is really not wise. You are probably going to live much longer than your parents did, and you want to be able to enjoy your golden years without having to worry about money. Some publications lately showed that having a million saved up for retirement won’t buy much. Why is that? Well simply put, you generally can withdraw around 4% of your nest egg every year, in order or it to regenerate and not deplete until you die. So having a million invested (which means having other cash savings and your mortgage paid off on top of that), would equate to around £40,000 a year in passive income, which if you include inflation over the next 30 years, will look more like £20,000 today. Not a whole lot if you are dreaming of a lazy retirement spent between golf courses and cruise ships.

So you need to plan, and start planning now. There are three things to take into consideration when you start saving:

• How much you earn, and how you can earn more to save more
• How much you spend, and how you can spend less to save more
• How well you invest, and how returns can impact your long term growth thanks to the power of compound interest.

Look at this chart Wealthsimple put together:

If you start saving today, and have £500 to put down, adding another £100 every month to your investment will turn into:

• £40,983 if you invest in a regular savings account
• £70,294 if you invest through traditional channels
• £95,771 if you invest through a low cost robo advisor such as Wealthsimple

Investment returns are not guaranteed to be a reflexion of past returns, but over the past 30 years, the S&P500 has returned over 8% annually, which is much higher than your traditional saving account for example.

So how do you start investing? Well it is much easier than you think, no need to read economic reports for hours on end or to wake up in the middle of the night when Tokyo opens. These days, algorithms have it all figured out for you. By using Wealthsimple, you decide how much you want to invest every month, and where you want the money to be allocated. For example, you can pick between a conservative, balanced or growth oriented asset allocation, where your portfolio is spread depending on your risk preferences.

A conservative asset allocation will have 60% of your money set in UK government and corporate bonds, and the rest in equities. A growth oriented asset allocation will have only 8% of your nest egg in bonds and 40% in UK and US equities. Obviously, with greater risk, comes a chance of greater rewards.

The first thing you should be doing is maximizing your stock and shares ISA allocation for the year, in order to get tax free returns. That is an instant boost on your returns the value of your tax bracket. Find more about ISAs from Wealthsimple here.

Investing is a long term game, and yes, the markets will go down, but if you keep investing regularly and over a long period of times, the odds are in your favour to build a sizeable nest egg for retirement. Proof above that you can turn £100 a month into close to six figures 30 years from now.

Wealthsimple: How it works

Wealthsimple is a Canadian company with a proven track record in both Canada and the US. You can open an account with £0, and they charge 0.7% in management fees, or 0.5% if your balance is over £100,000.

Usually, the first £5,000 is managed free of charge, but if you use the link below, you can get your first £10,000 managed for free.

Your portfolio is designed to match your financial goals, and are kept balanced automatically. Dividends are reinvested automatically as well, so you can compound your money for greater earnings.

If you have over £100,000 to invest, on top of lower management fees, you will enjoy a dedicated financial planning service and VIP airline lounge access when you fly.

Special Offer

Click here to sign up for Wealthsimple and get your first £10,000 of investments managed for free for a year!