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baby boomer with no pension: options

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The ‘baby boom’ took place between 1945 and about 1960 (approximately) and the boomers will be approaching retirement shortly. If you’re a boomer and you have no (or very little) pension in place, what should you be doing?

Having established how much you are currently entitled to, and what additional assistance the government might be offering and calculated your total possible retirement income.

In all cases, if you don’t think that you could live off your total possible retirement income, then your main options are to work beyond your planned retirement age, to sell your home or use equity release to provide additional income.

If your total possible retirement income is below about £87 per week (£4524 per year) then it might not be worth investing or saving additional money for your retirement. This level of retirement income is most likely to happen if you have not contributed to the National Insurance system, and you either can’t save very much or you don’t have very long to go until your retirement. You should consult with people like the Citizens Advice Bureau to determine what might be your best course of action. You are likely to be dependent on the pension credit to maintain a reasonable income in your retirement. Your main alternative option is to see if you can increase your entitlement to the state pension through additional National Insurance contributions. In addition you should revisit your budget to see if you can squeeze more money for retirement savings to put you into the next category.

If your total possible retirement income is between £87 and £167 per week (£4524 and £8684 per year) then it is probably worth investing or saving the additional money in your budget for your retirement. You will probably benefit from the pension credit but your benefit may be increased by your additional income. You could consider investing in a stakeholder pension (or other form of personal or employer pension) as the money paid in is free of tax now and is unlikely to be taxed in the future as your income will be too low. The other main option for your retirement investment is a stocks and shares ISA - its biggest advantage for you is that you don’t have to use it for your retirement but could pull the money out earlier. In addition to the general options outlined above, to increase your retirement income you may want to revisit your budget to see if more investment money can be squeezed out - you will need to weigh this against any decrease in pension credit that you might receive.

If your total possible retirement income is more than £167 per week then it is almost certainly worth investing or saving the additional money for your retirement. You will probably want to consider using a stocks and shares ISA for some or all of this additional money to minimise your tax burden - particularly if your total possible retirement income is close to or above £400 per week. You may also want to use a personal pension to take full advantage of your tax-free allowance once you are over 65. If you are in this situation you will almost certainly benefit from revisiting your budget to see what more you can put towards your retirement.

In all cases these are just suggestions for what to consider - you should carefully work through your own situation, and consider employing a financial advisor or seeking advice from the Citizen’s Advice Bureau. In particular your retirement income may be affected by any time that you have spent working abroad, any disability issues that exist in your family and your entitlement to other benefits.

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