Nobody gets rich on the State Pension! I’d buy FTSE 100 shares to retire early
The Motley Fool
Published May 29, 2020 09:53
Updated May 29, 2020 10:10
Nobody gets rich on the State Pension! I’d buy FTSE 100 shares to retire early
The FTSE 100 has had a bumpy year, due to the coronavirus crash. I wouldn’t worry overly though. The index has endured bumpy years before, but always recovered over time.
The index of top UK stocks remains a great way of building long-term wealth for your retirement. The State Pension isn’t enough on its own. Your latter years will be a struggle if that’s your only source of income.
You can build a secondary pension fund by investing in FTSE 100 shares. Today’s a good time to buy them, because many top companies are now trading at bargain valuations.
This happens every time stock markets crash. The good companies get sold off along with the bad. If you pick your targets carefully, you can pick up shares in top FTSE 100 blue-chips at a 20% discount to just a few months ago.
I’d look at these FTSE 100 dividend heroes The economy is hurtling towards recession, and many companies will see sales plunge. However, some should escape the worse. My favourite targets right now include consumer goods giant Unilever (LON:ULVR), spirits group Diageo (LON:DGE), grocery chain Tesco (LON:TSCO), healthcare specialist GlaxoSmithKline, global telecoms supplier Vodafone (LON:VOD), and oil giant BP (LON:BP).
I think these have the financial strength to benefit when the economy recovers. All five are standing by their dividends, for now, which is a sign of strength. You can take your income and growth free of tax, inside a Stocks and Shares ISA.
Investing in FTSE 100 shares like these is a great way to complement your State Pension. Under the triple lock, it rises each year in line with either earnings, inflation, or 2.5%, whichever is higher. Unfortunately, it only gives you a basic level of income.
Under the new State Pension, a single person gets just £175.20 a week, which is worth just £9,110 a year. That’s just a third of the average national full-time salary.
The State Pension needs back-up Worse, you only get that if you qualify for the maximum amount, having made 35 years of qualifying National Insurance contributions. Others will get less.
That’s why you need to make your own provision. Cash in the bank will do little to boost your wealth, as it generates near zero interest. FTSE 100 shares, on the other hand, should outperform every other type of investment, over the longer run.
Get The App
Now’s a good time to buy them, provided you intend to hold for the long term. Once the economy recovers, share prices should pick up further, boosted by fiscal and monetary stimulus. You can hold them for life, reinvesting the dividends for growth while you’re working. Then when you retire, draw those dividends free of tax from your ISA to top up your State Pension.
Would you like to get rich and retire early? FTSE 100 shares can help you do it.
The post Nobody gets rich on the State Pension! I’d buy FTSE 100 shares to retire early appeared first on The Motley Fool UK.
us better investors.
Motley Fool UK 2020
First published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.