Prices of UK shares continue to struggle to gain traction as the Covid-19 crisis rolls on. Many believe that another stock market crash is a matter of time as signs of a second wave of infections grow. Investors are worried if they can afford to invest their hard-earned cash in the current climate.
My view on the matter is rather different. I think that you and I can’t afford not to buy UK shares right now. This is because the State Pension — which has long been in danger as government grapples to fund Britain’s rapidly-ageing population — is in unprecedented peril following the Covid-19 outbreak.
Annual rises in the State Pension have failed to keep pace with the growing cost of living and social care in recent years. The government has taken steps to gradually raise the age at which the State Pension can be claimed too. And now calls are being heard to scrap the ‘triple lock’ which sets the minimum level by which payouts should rise, as the Treasury faces a huge rise in pension payments in 2022.
Buying UK shares after the crash
It’s clear, then, that we all need to take increasing charge of planning for our retirement. Data shows that the number of pensioners living in poverty has ballooned over the past decade. And mounting pressure on the State Pension means that the trend is only likely to get worse.
This is why I’ve continued to buy UK shares in my Stocks and Shares ISA in 2020. Sure, another stock market crash could be just around the corner. But studies show that, over the long run, investors in UK shares can make big money with the right investment strategy. And they don’t have to spend a fortune trying to build a decent nest egg for retirement.
Based on proven rates of return, you could protect yourself from a declining State Pension with as little as £250 a month. Someone who invests this amount in UK shares over the space of 30 years can expect to make anywhere between £352,000 and £516,000. This is based on evidence showing that long-term investors tend to make an average annual return of between 8% and 10%.
Protect yourself in retirement
I’d argue that the stock market crash allows you and I to hit the upper echelons of this range as well. It gives us the opportunity to buy UK shares at rock-bottom prices, and then to watch them explode in value as the economic recovery takes hold. This is the strategy that saw the number of ISA millionaires explode in the decade following the 2008/2009 market crash.
Taking steps to protect yourself against an increasingly-ragged State Pension needn’t be expensive or difficult, then. And what’s more, experts like The Motley Fool can help set you on the right path with tips on how to build a formidable investment strategy. So take the bull by the horns and consider building a big retirement fund with UK shares.
The post Forget your State Pension worries! I’d invest £250 a month in UK shares to retire rich appeared first on The Motley Fool UK.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020