**NOTE: THIS IS STILL A DRAFT** ## Retirement Properly saving and investing for your retirement is probably the best and most important financial decision of your life. Yet many people avoid it. I understand it. It's scary, confusing and your retirement is 40 years away. So you save it for future you. And then the months and years go by and you still haven't sorted it. I think the best way to motivate someone to sort out their retirement saving is to remind them that if they do it properly they can retire quite a few years earlier. Literally having to work for less years. Here's a very brief overview of what you should do. ### Max out the contribution your employer will match Whatever percentage your employer matches when it comes to adding to your pension make sure you max it. Even if it's crazy high like 20% you need to max it out. You're unlikely to ever get a better financial deal offered to you. ### Make sure it's invested properly Make sure it's invested. It likely is by default. But double check. Then make sure it's invested properly. First things first you need to try and avoid any 'actively managed' funds. These are essentially run by well-paid investment people. They charge you a lot and nearly always make you less money than a 'passive' [[Index fund]]. Most companies that employers use to manage your pension will put it into something actively managed. So you need to login to where ever your pension is managed and make sure it's invested in something as passive as possible *(I understand for some of you that this step alone is tough. You might not have ever logged in or looked at your pension before. You don't even know how. But you need to push through. It's vital. Find out how to log in. Please, please, please).* This can be where it gets confusing for people. There's a long list of funds that the company offers and they all have weird names and link to PDFs that make little sense to you. But just take a breath and let's work through it. You're looking for a fund that has a few things: - Is 'passive'. - Charges the smallest amount. - Invests in the whole world, not just your country. - Invests nearly entirely in stocks, not bonds (debt). Maybe your pension provider makes it really easy for you and you can filter out the actively managed rubbish. But if not just work your way through the list of fund options. Some things to look for: - 'World' or 'All Word' in the name. - The details of the fund might list a % or show a pie chart. This is likely the % of types of assets. Things like equities/stocks, bonds/debt/fixed income, commodities or cash. You're looking for one that has the highest % of equities/stocks (unless you're within 10-15 years of retirement. See 'withdrawing' below instead). - The fee should be listed somewhere. If it's below 0.50% it's likely a passive fund. If it's above 1% it's almost certainly actively managed and you should avoid it. ### Contribute as much as you can as early as you can Most people contribute the bare minimum to their retirement. You'll be at an advantage if you can save as much as possible. Obvious, I know. But the thing with retirement money is that it's often invested for a long time before you touch it again. So it has the chance to compound. Compounding is the miracle of investing. Say you take £1,000 and invest it. You don't touch it or add to it. You just leave it until you retire. After 40 years at 8% interest that £1,000 will be around £24,500. However the more time you let compounding do its magic the better. For example, here's the return of £1,000 at 8% over different lengths of time: -