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No retirement savings at 50? I’d invest £150 a week in UK shares to double the State Pension

Peter Stephens
·3-min read
Active senior woman with dog on a walk in a beautiful autumn nature.
Active senior woman with dog on a walk in a beautiful autumn nature.

Investing in UK shares could improve your retirement prospects and reduce your reliance on the State Pension.

Even if you’ve no retirement savings at age 50, it’s not too late to start investing regularly to build a nest egg. In fact, a modest amount of money invested in a diverse range of British shares could lead to a surprisingly large retirement portfolio that provides financial freedom in older age.

A long-term view of UK shares

In the short run, the prospects for UK shares continue to be relatively uncertain. Risks such as Brexit and coronavirus could hold back their performance to a degree in the coming months. However, over the long run, a portfolio of British shares could deliver impressive returns.

For example, despite experiencing a number of downturns and bear markets, indexes such as the FTSE 100 have produced high single-digit annual total returns since inception. This rate of growth could turn a modest investment into a sizeable nest egg.

Moreover, investors aged 50 are likely to have sufficient time for their nest egg to grow. They’re likely to have a long time horizon, since the retirement age has recently moved to 66. This should provide their investments with scope to recover from short-term risks facing UK shares that threaten their performance in the coming months.

Investing money in British shares

With low interest rates and high house prices, UK shares could offer the most attractive means of obtaining a retirement nest egg. Even investing modest amounts of money on a regular basis could produce a worthwhile passive income in older age that reduces your reliance on the State Pension.

For example, investing £150 per week in a diverse portfolio of stocks from age 50 until retirement at 66 could produce a portfolio valued at around £253,000. This assumes an 8% annual return, which is in line with the stock market’s past performance. From this portfolio, a 4% annual withdrawal could produce a passive income of around £10,100. That’s roughly £1,000 higher than today’s State Pension. And that could provide greater financial freedom in retirement.

Starting to buy stocks today

Starting to invest in UK shares today is a relatively simple process. Opening a tax-efficient account such as a Stocks and Shares ISA can be done in a matter of minutes online and without significant costs. This makes it accessible to almost all investors. And that includes those who have a modest amount of money to invest on a regular basis.

Although in the short term the risks facing the stock market are high, this can produce lower valuations that lead to higher gains in the coming years. Therefore, now could be the right time to start buying a diverse range of FTSE 100 and FTSE 250 shares to improve your retirement prospects.

The post No retirement savings at 50? I’d invest £150 a week in UK shares to double the State Pension appeared first on The Motley Fool UK.

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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