It’s proven that the wealthiest earners in the UK and USA spend spend a smaller proportion of their income on a home than other income brackets do.
Just because you can afford a great big house it doesn’t mean that you need it – it probably isn’t the best decision for your future.
For example, is there a need to have 3 bathrooms if you live by yourself? Probably not. You will find paying off the mortgage of your house or flat easier before you retire if you live in a simple place.
Living off social security benefits and a pension is no longer regarded as a retirement plan that will leave you wealthy.
There are new models and methods being introduced to counter the ineffective traditional retirement plan. People are now using their income to invest into different schemes; either going into real estate, business accounts, taxable investment accounts or ISAs.
The new savings phenomenon is Innovative Finance ISAs (IFISAs). Due to the increased tax-free ISA allowance of up to £20,000 - savers are switching to IFISAs with the possibility of earning up to 8.24% interest.
As consumers become wealthier, spending habits and behaviours often tend to change quite drastically.
The most obvious piece of advice would be, ‘don’t go bonkers’. However, it’s inevitable that you’ll spend some and it would be wrong not to treat yourself every now and then. However, it must be managed and that’s the key to retiring wealthy. Manage your wealth while you have it.
When you’ve got money; you have endless amounts of freedom and opportunities but paying off your debts will bring you a completely new level of comfort when you’re retired.
Because then you will be able to enjoy everything you’ve worked so hard for. ‘Power Savers’ put 20% of their income into savings. It’s important to remember that saving and decreasing your debt allows you to do whatever you want whenever you retire. You can fully enjoy the all the money you have when you retire.
Wealthy retirees tend to have diversified portfolios of investments and have income instead of a traditional retirement plan.
However, it can be difficult deciding what type of investments you want. The main thing to consider when deciding what to invest in is; what kind of life do you want to live after you’re retired?
If you want to manage rental properties then real estate is clearly the right path. If you want to simply relax during your retirement, an ISA might be the way forward with its capacity to turn your investment into tax-free interest.