The importance of saving for retirement is stressed to us from an early age. We hear horror stories of retirees who must return to the workforce because they do not have enough money to survive. Other elderly people sacrifice to the point of not eating or turning on their heat, which has health consequences as serious as death. If we do not receive a pension funded by our employer, we must allocate some of our monthly salaries to retirement savings.
Find out ways to increase retirements savings by handling debts and consolidating them into one lower affordable repayment. We have several debt management plans that can help you.
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Saving for retirement is no easy task, considering that living expenses are steadily increasing
For people in debt, it can be impossible because there may not be enough money left over after making large debt repayments. People who are struggling to repay debts or have established a debt management plan with a very long term may have to wait many years to make pension contributions. These individuals should consult with a debt expert to determine whether a shorter-term repayment plan is recommended.
While making contractual repayments to creditors can eliminate debt, a debt management plan may accomplish this more quickly, especially if a freeze on interest charges is negotiated. For individuals in a long-term plan, an Individual Voluntary Arrangement may eliminate debt quicker. It has a typical term of five years. For residents of Scotland, a Scottish Trust Deed has a three-year period. People with the highest levels of debt may want to consider bankruptcy, which can have them debt-free after a year.
Once debts are satisfied through one of these debt management programs, money previously allocated to debt repayment can serve as pension contributions. The earlier people address their debts and the more quickly they repay them, the sooner they can begin saving money for retirement. However, even if pension contributions do not begin until later in the working career, it is still better than not saving at all.
As an example, consider people who contribute £300 each month to repay debts
Once the debts are satisfied, this money can be contributed to a pension. If people begin doing this at age 30, they will have £230,000 in retirement savings by age 65. If the pension contributions begin at age 40, there will be £136,000 in the pension account at age 65. Beginning these contributions at age 50 will result in pension savings of £69,000 when these individuals turn 65.
Informal and formal debt programs should only be used when necessary and an insolvency-type solution should be viewed as a last resort. However, the fact remains that these programs can allow people in debt to begin saving for retirement more quickly than if they were not used. Selecting a program with a reasonable timeframe can result in significant pension balances by retirement age.
The figures illustrate the importance of dealing with a debt issue as early as possible. In addition to creating a more comfortable financial future, debt repayment can assist individuals with interest-only mortgages. Repaying debts can help them move to a repayment mortgage that allows them to maintain their home during the golden years.