Important Life Milestones for Financial Planning
Financial planning is a dry subject at even the best of times, but a vitally important one for people to engage with on a regular basis. Without proper financial planning, major life milestones such as the purchasing of a home or the decision to retire can become stressful and difficult.
There are some specific ages at which financial milestones occur, though; these can be helpful for visualising your next steps, and understanding the ways in which money can work for you.
Age 11 – First Bank Account
The age of 11 is the most common age at which banking institutions enable younger people to open their own current account. This is the start of the journey – and, while too late for you reading this piece, a good reminder for when to start your children on their own financial journey.
Age 18 – Adult Financial Products
At the age of 18, teenagers legally become adults in some essential ways, from being legally allowed to drink alcohol to becoming eligible to vote. 18 is also the age at which some key financial products become available to you, including the ISA.
ISAs are tax-free savings accounts that can be used to grow money without paying tax on interest; LISAs are limited-access accounts that can be used to buy property, and enjoy a 25% contribution from the government on usage.
Age 22 – Employer-Backed Pension
This age is not a major milestone per se, but more a gentle nudge towards taking more shrewd steps towards your finances and future. 22 is the age at which you are automatically enrolled into employer-backed pension schemes as an employee.
You can enrol yourself at a younger age, in order to maximise contributions, but 22 is the age at which minimum contributions are taken and made on your behalf. This is the year at which saving for the future becomes key.
Age 55 – Equity Release
At the age of 55, you become eligible to apply for an equity release mortgage. Equity release is a process by which a portion of your home’s value is released to you in advance, whether as a lump sum or as a regularly-paid annuity. Equity release mortgages are powerful ways to leverage the value of your home – your most valuable asset – to meet other financial goals. They are particularly useful with regard to planning for retirement. Speaking of which…
Age 65 – Retirement Age
Retirement is not an event with a hard and fast ‘deadline’ attached to it. Indeed, relatively recent changes to retirement law have made it discriminatory and illegal for businesses to attempt to force retirement on account of age. As such, retirement is a decision you make on your own terms, and in your own time. However, many people tend to retire around the same time, with 65 a current common age at which people choose to leave the workforce.
In the future, though, this number is likely to rise. The state pension age is rising steadily, with a new cap of 68 set to apply from around 2039 onwards. Retirement enables you to gain access to your pension, but is an understandably nerve-inspiring move. In order to feel comfortable with retirement, you will already need to be familiar with the cost of your current lifestyle – and whether your savings and pension are enough to meet said lifestyle.
