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Pension planning could make the difference between counting pennies in retirement and having room for holidays, dining out, and giving gifts to family and friends.
As it turns out, having an extra £2,000 a month on top of the State Pension can provide a lot of welcome flexibility to achieve just that, according to Pensions UK. But how big does a retirement portfolio need to be to reliably and sustainably generate that additional £24,000 a year? Let’s find out.
Calculating the pension pot
Following the classic 4% withdrawal rule, earning £24,000 a year demands a portfolio worth £600,000. Obviously, that’s not pocket change. But while it certainly might look like a daunting number, it’s actually far more achievable than most people might think.
When leveraging the power of compounding over the long run, putting aside as little as £500 a month to invest at a 10% rate would reach this milestone in roughly 25 years, starting from zero. And that’s perfect timing for anyone who’s just turned 40 aiming to enjoy retirement at 65.
However, while consistent contributions and investing do the heavy lifting, there remains the challenge of finding the right investments that can deliver wealth-building gains. And that’s where one particular FTSE 100 stock comes into the picture.
A potential growth engine?
There are a lot of promising UK shares to consider buying today. However, one I think is unusually attractive right now is RELX (LSE:REL) – the supplier of professional data, information, and software used throughout the legal, academic, and financial sectors.
Its proprietary databases are already extensively used in the background of many global leaders. And that integrated sticky relationship’s only being reinforced with the introduction of Relx’s new AI tools to boost the effectiveness and value of its curated data ecosystem.
When looking at its latest trading update, underlying revenue has jumped 7% over the last nine months, with a 10% boost stemming specifically from the legal sector. That’s despite a sudden landslide of panic earlier this year from investors fearing that AI would disrupt this enterprise rather than empower it.
As such, leadership reaffirmed its full-year earnings growth target and subsequently institutional analysts have turned more bullish, with the team at UBS issuing a 3,780p share price target – around 27% higher than where Relx shares trade today.
What could derail progress?
While concerns surrounding AI disruption back in February were blown out of proportion, they’re not entirely without merit. Relx’s databases are unrivalled compared to what’s in the public ecosystem, but accessing them is exceptionally expensive.
And if cheaper third-party AI tools can deliver good-enough results for less critical tasks, Relx’s customers may decide to pull back spending in non-mission-critical areas.
In other words, long-term growth could prove more challenging. However, the company does have an impressive track record of adapting to competition. That’s why, despite this risk, I think Relx is a company worth mulling as part of a broader pension portfolio.
Should you invest £5,000 in RELX right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if RELX made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
