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I invest in my portfolio of UK and global shares at every opportunity. Why? Not doing so leaves me in danger of retirement poverty.
That might sound sensational. But new research today (3 June) shows how just relying on the State Pension can cause a huge cash shortfall in later life.
What did it say?
Chilling data
Pensions UK is a trade body representing workplace pension schemes and providers. It found that just 9% of the working population can expect a ‘comfortable’ standard of living in retirement.
It found that a comfortable lifestyle costs £45,400 a year for one person, and £62,700 for a two-person household.
The organisation said its data reflects “increased everyday costs across spending categories such as food, essential household bills and transport, as well as the social activities and hobbies“.
It gets worse…
That 9% figure is a pretty sobering figure. Yet Pensions UK wasn’t done yet. Its research also showed just 23% of workers were on course for a ‘moderate’ lifestyle. This costs £32,700 for one person and £45,400 for two people.
To top things off, the association said millions might not even achieve a ‘minimum’ standard of living. It noted that 82% of workers are on course to hit this threshold, which amounts to £13,900 for one individual and £22,500 for two.
Zoe Alexander, Pensions UK’s executive director of policy and advocacy, said that
Without action, too many risk facing a cliff-edge drop in income when they stop work.
So what can we do about it? The solution may be close at hand.
Taking action
The long-term power of the stock market means everyday investors can realistically build wealth that transforms their retirement. Products like the Stocks and Shares ISA make it even easier to target life-changing wealth.
What’s more, these products protect investors from taxes on capital gains and dividends, giving us more money to build our portfolios.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
The average annual return from share investing is 9% over the long term. If someone can hit that figure by investing roughly £350 a month, they’d have an ISA worth £650,000 after 30 years.
This could then provide them with £45,500 passive income each year if invested in 7%-yielding shares.
An 8% income opportunity?
Legal & General (LSE:LGEN) is a UK dividend share I personally own. I reinvest any income today to grow my portfolio. When I retire, I plan to use its dividends to fund my lifestyle.
Dividends are never guaranteed. And in the future, payouts from this FTSE 100 share could be impacted by rising competition or changing regulations. Yet, I’m confident it can continue paying an enormous and reliable passive income, underpinned by its leading positions in booming financial services segments (like pensions and asset management).
Legal & General shares have delivered a growing dividend in 13 of the last 14 years. And in that time it’s yield has averaged above an impressive 8%. UK shares like this are a great way to target a comfortable retirement, in my view.
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Royston Wild owns shares in Legal & General.
This story originally appeared on Motley Fool
