The Stock Market Could Be Your Last Chance For A Happy Retirement

Cash can’t guarantee you a happy retirement, the stock market may be your last chance.

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There was a time when cash was king, but it lost its crown in March 2009 when the Bank of England slashed base rates to 0.5%.

If you had saved £10,000 in cash five years ago, and earned an average return of 2% a year, your money would have grown to just £11,041.

At that rate of return, cash can’t guarantee you a happy retirement.

retirementStocks have doubled your money

By contrast, if you had invested your £10,000 in the FTSE 100 index, you would now have £20,300. You would have more than doubled your money, before inflation.

Despite this, savers remain astonishingly loyal to cash.

Savers paid nearly £41 billion into cash ISAs in the tax year to 5 April 2013, far more than the £30 billion invested into stocks and shares ISAs, according to new research from accountants UHY Hacker Young.

Yet the average savings account pays just 0.62%, according to figures from Moneyfacts.

Over the last 12 months, by contrast, the FTSE 100 has delivered a total return of 11%, including growth and dividends.

Pound CoinsThe dash from cash

As pension savers wake up to this shocking truth, their loyalty to cash is finally starting to waver.

The number of over 50s opening share dealing accounts has leapt by 80% in the past year, new figures from Saga show, as savers finally tire of waiting for the base rate to rise.

You can hardly blame them. It has been a long wait, with no end in sight.

houseBricks and mortar and effort

There are other alternatives, of course, notably buy-to-let. This delivered an average annual return of 9.7% over last 12 months, from a combination of rental income and capital growth.

Some people will retire happily on the proceeds of buy-to-let.

But setting yourself up as an amateur landlord isn’t as simple as opening a share dealing account. You need tens of thousands of pounds for a deposit.

You have to find a mortgage, do up the property and deal with tenants.

By contrast, you can invest in the stock market in moments, from as little as £500. And you never have to worry that a dodgy tenant might trash your investment.

Yes, shares can be risky

There are still dangers. Markets have the habit of crashing.

That’s why you should only invest money you don’t expect a need for at least the next five years, or 10, 15 or 20 years, to protect you against future bouts of short-term volatility.

stock exchangeYou should also look to drip-feed regular sums into shares, rather than throw all your money into the market in one go. That limits the fallout from a sudden correction.

New ISA rules will allow you to invest up to £15,000 a year tax-free. You can put it all into cash, if you wish…

… but if you do, your savings are doomed to suffer a slow, sad death. The stock market could be your last chance for a happy retirement.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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