Forget the Bitcoin price. I’d follow these 4 steps for a comfortable retirement

Bitcoin has had a cracking start to 2020 with its price climbing a little over 30% in just a few weeks. Predictably, this has only served to fuel bullish talk that the cryptocurrency is about to go on another sustained run.

This is pure speculation, of course. Unlike stocks, Bitcoin is solely dependent on sentiment for price appreciation. Your only hope of making money is if someone decides to pay more for a slice of the action than you did.

That doesn’t seem the most reliable way of securing a comfortable retirement to me. Here’s a far better way of going about it. 

Know your goals

Wanting to secure a great retirement is understandable, but it requires a bit of thought. Without even a rough plan of where you want to be, you’ll never know when you’ve got there. 

Before beginning to save, it’s therefore important to ask yourself a few, admittedly difficult, questions. When are you hoping to retire? How much money will you need to live the life that you want? And yes, how long do you expect to live for?

Only by having (rough) answers to this brutal lot can you begin to work out how much you need to stash away. 

Save, save, save!

There are a number of ways of saving for your golden years. Probably the easiest is through a workplace pension, assuming you qualify for it.

For some people, however, this still won’t be enough to pay for the lifestyle they want and more intensive saving will be required.

One way of doing this is to treat savings as an expense, like your monthly gas bill or car loan repayment. By setting up a direct debit to take money out of your current account on the first day of every month, you’ll give yourself one less job to do. You’ll also remove the temptation to spend what you might potentially save on discretionary consumer goods that you don’t actually need. 

Take calculated risks

Some asset classes are very unlikely to make you wealthy. With interest rates still extremely low, cash is the prime example. Bonds also offer poor returns over the long term. Buy-to-let can be more trouble than it’s worth. 

To secure a great retirement, you’re going to need to take on at least some risk. For most people, that means having a chunk of their money invested in the stock market.

Don’t assume, however, that you need to learn how to pick great stocks. A small group of cheap index trackers or exchange-traded funds housed within a Stocks and Shares ISA or Self Invested Personal Pension (SIPP) might be all you need to make your retirement dreams a reality.

Start NOW

Aside from saving whatever money you can, it’s also important to start as soon as possible.

Yes, time matters when it comes to investing and even an extra few years can make a real difference. Save £200 every month for 30 years and you’ll have £227,000 at the end (assuming 7% annual returns and ignoring fees). Save the same amount for an extra five years and you’ll have £332,000 — almost 50% more. 

It’s examples like these that make me put my faith in the power of compounding over something as predictably unpredictable as Bitcoin.