Retirement planning with ISAs – How to do it right

Whether you’re looking at travelling the world once you retire or have other plans for your work-free days, you’re going to want to explore the different avenues when it comes to investing for your retirement.

With that being said, have you considered the many benefits of Individual Savings Accounts (ISAs) for your retirement?

Read on to find out how ISAs work, what they can bring to your retirement plan, and how things like financial advice and an effective retirement planning tool can be incorporated into your approach.

How do ISAs work?

Firstly, let’s find out how ISAs work. ISAs are specific investment accounts that allow you to:

  • Grow your savings, tax-free each year
  • Invest up to a certain amount in your ISAs each year
  • Shelter your ISA savings from tax, including income tax and Capital Gains Tax (CGT)

The amount you can contribute each year is decided by the annual ISA allowance, and for the current 2023/2024 tax year, this stands at £20,000.

There are four types of ISAs you can invest in:

  • Cash ISA
  • Lifetime ISA
  • Innovative finance ISA
  • Stocks and shares ISA

It’s important to note here that you can only open one of each type of ISA each year, and your allowance must be shared across all accounts you open. Also, your allowance cannot be rolled over and will reset at the beginning of every tax year.

How can you use ISAs when planning for retirement?

Here are some of the ways ISAs can be a benefit when planning for your retirement:

Tax-efficient savings towards your goals

One of the main benefits of ISAs is that they can help you grow your savings tax efficiently to reach your retirement goals.

There are many goals you can have for your retirement, and these will likely require you to have a certain amount of savings. This could include retiring early, supporting financial dependents, or having wealth to last your whole retirement.

By making the most of your ISA allowance each year, you can build a significant sum of money to withdraw tax-free, when you retire, to help towards your goals.

This can effectively be doubled if you have a partner who makes the most of their own ISA allowance each year too.

Diversified investments

ISAs also offer different types of accounts to grow your wealth, so you can diversify your investments.

For example, a standard cash ISA can help you save your money tax-free each year. A stocks and shares ISA can give you the opportunity to grow your savings with successful investments in certain securities.

Also, any growth that occurs from these investments will remain sheltered from income tax and CGT.

On top of that, spreading your investments across different ISAs can help you adopt a more appropriate risk level, and protect your wealth better.

Full account visibility and management

If you open your ISAs with an expert modern wealth management service, this can also offer you complete control and visibility over your wealth as you build it towards your retirement.

You can gain access to an advanced platform that contains all your ISA investments in one place. You can then decide how much, and when, you contribute to your ISAs each year, and track how your investments are performing.

With a financial adviser’s help, you can also make sure these investments are aligning accurately with your retirement goals as well as your financial circumstance.

Are you considering adding ISA investments to your retirement plan? As with anything, make sure you discuss your options with a modern wealth manager to help ensure they’re well-suited to your unique financial situation.

Please note, the value of your investments can go down as well as up.