Why The Next Month Could Make Or Break Your Retirement Plans

With the current tax year ending on 5 April, there's only around a month for investors to pay money into their ISAs. Once the new tax year starts, a new allowance of £15,240 is available and the allowance for the 2015/16 financial year will have been and gone. Therefore, long-term investors who are focused on bringing retirement a step closer may wish to invest in shares before the ISA deadline.

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Clearly, ISAs are a relatively efficient means of investing for the long term. The cost of opening and operating one is very low and a major benefit of having an ISA versus a pension is that the money can be withdrawn at any point before retirement. Although this won't be helpful to anyone's long-term financial outlook, the ability to withdraw money from an ISA provides a useful safety net in case of redundancy, sickness or other emergency.

Furthermore, ISAs are also highly tax efficient. Although the money paid in has already been taxed, any capital gains made within the ISA aren't taxed and all withdrawals are also tax-free. And with dividends received in an ISA not counting towards the £5,000 allowance each year (above which dividends are taxed at 7.5% for basic rate taxpayers), ISAs remain a tax-efficient means of planning for retirement.

Act Now!

Of course, investing now rather than waiting until next year or some other future date is also highly beneficial. That's partly because of the effects of compounding, which allows the returns received to themselves earn a return. In the long run, even a relatively modest annual return can really add up.

For example, the FTSE 100 has recorded a total return of around 9.3% since inception in 1984. Posting returns at that rate over 10 years would turn a £1,000 investment into £2433, while over 30 years it would cause it to rise to a much more appealing £14,408. As such, investing as soon as possible tends to have a positive impact on an investor's retirement plans.

Now could also be a good time to invest because the FTSE 100 appears to offer good value for money. With it having fallen by 12.5% in the last year, it now trades on a price-to-earnings (P/E) ratio of just 13, which could rise much higher. And with the FTSE 100 having a yield of over 4%, it seems to offer excellent income prospects too.

Profit from uncertainty

Certainly, the global economy is facing a considerable degree of uncertainty and the UK itself is at a crossroads when it comes to the issue of the EU. But for long-term investors who have cash to spare, investing now through as ISA could be a sound move since history has shown that the best buying opportunities tend to come along when the future appears to be at its most uncertain.

With that in mind, the analysts at The Motley Fool have written a free and without obligation guide called 5 Shares You Can Retire On.

The 5 companies in question offer stunning dividend yields, have fantastic long-term potential, and trade at very appealing valuations. As such, they could deliver excellent returns and provide your portfolio with a major boost in 2016 and beyond.

Click here to find out all about them - it's completely free and without obligation to do so.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.