A rising State Pension age has been in the works for some time, and today it officially hit 66. Depending on when you were born, this number will continue rising to 67 and then 68 years of age. Those qualifying for their State Pension at 66 were born between 6 October 1954 and 5 April 1960.
A dwindling State Pension
The amount qualifying citizens receive today is £175.20 a week, which works out at around £9,110 per year. This is lower than what most minimum wage recipients earn and far from enough for the average person to comfortably live on. That’s why topping up your State Pension with additional income streams is vital to a happy and relaxed future.
Battling to get by on a meagre income is not only difficult, but it’s bad for your health. The struggle to afford basic amenities can cause undue stress, leading to depression and health problems. You don’t want to be poor and miserable in your retirement years if you might avoid it. Thankfully, there’s a way for those with the means and it starts with the stock market. By investing regularly, you can achieve a much better standard of living later in life.
Investing in the financial markets is one way to build up a significant sum to your State Pension and enhance your twilight years. It’s a quick and easy process to set up a Self-Invested Personal Pension (SIPP) from which you can buy a wide range of investments. These include index funds, exchange-traded funds (ETFs), investment trusts, company stocks or corporate and government bonds.
If you know little about investing and would rather take a passive approach, you can commit to regularly investing in a simple tracker fund. There are many funds to choose from and the simplest follow the trajectory of an entire financial index, such as the FTSE 100 or FTSE 250. This can provide an excellent introduction to stock market investing and is easy to understand. Although the financial indexes have seen extreme volatility this year, historically they have risen over longer periods.
There’s a very clear risk-reward ratio when it comes to investing in equities. This means the riskier the investment, the higher the chance of a reward (a big return on your initial sum). However, when it’s your future financial stability we’re talking about, safer is always better. That’s why a fund is safer than individual shares for beginners.
To buy individual shares, you really need to be confident in what you’re buying, before risking your hard-earned cash in speculative companies for the thrill. Don’t let this put you off, though. If you’ve the time and interest in learning how to invest for profit, equity investing can be a very enjoyable and lucrative journey.
The coronavirus pandemic has highlighted the range of health issues present in society, even among the young and healthy. Underlying health issues can arise at any time, and could have a detrimental effect on your ability to work, possibly forcing you to retire early. I think it’s very likely that if you’re under 40, you will be looking at a State Pension age of 70-plus. This illustrates why it’s more important than ever to prepare for your financial future as soon as you possibly can.
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Motley Fool UK 2020