Some people assume that once you retire, you effectively become financially inactive. However, for many pensioners this simply is not the case, with many continuing to make investments and undertake other financial activity, such as casual work, in order to provide themselves with a good income in their retirement. Saving money as tax efficiently as possible is also a good way for pensioners to make the most of their money.
A good example of this is the UKâ€™s stocks and shares ISA which is similar to an IRA in the US: one of the main benefits of an ISA is that you donâ€™t have to pay any tax on the dividends or interest you earn which is a big bonus, especially for pensioners. After all, if you have spent your whole working life paying tax, you wonâ€™t want to pay it once you have retired unless you absolutely have to!
Also, if you choose to take out an investment ISA, there is the potential to earn very good rewards on the money you put into it. One thing to note is that because it is a form of investment, there is a chance that your investment will decrease as well as increase, but if you are able to invest over the long term, you should have a good chance of growing your money.
There are also some ways you can limit the risk associated with a shares ISA. For example, rather than a â€˜traditionalâ€™ stocks and shares ISA that invests in the stock market, you could instead choose to have a bonds and gilts ISA which invests in corporate bonds and government gilts. These still come with some risk but they are typically more secure investments and even though they tend to have a lower return than other share ISAs, for many people this is a sacrifice worth making because they appreciate the lower level of risk.
ISAs are also fairly flexible and you can save according to your ability to do so, as long as you donâ€™t go over the annual limit for ISA savings. This means that if you want to put in a regular amount each month you will be able to do so. Alternatively, you can choose to save as and when you are able to do so, a choice that many pensioners are sure to appreciate.
Overall, an investment ISA can make a good choice for pensioners who are looking for tax efficient savings, as well as an investment that has the potential to boost their income during retirement. Just remember to bear the risk in mind and have a look around so you can choose the most appropriate ISA for your personal needs.