Sorry millennials, you’re never going to retire

Harvey Jones says today’s younger generation faces a stark choice: invest now or work until you drop.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I hate to be the bearer of bad news, I really do, but someone has to say it. If you are under 40, the age of retirement has passed on. It is no more. It has ceased to be. The reason is quite simple: you will not be able to afford it. There are exceptions, and you can be one of them, but only if you take action now.

Basic facts

First, some facts to scare the life out of you. The full basic state pension is currently £119.30 per week. That works out as £6,203.60 a year. Do you fancy living on that for the last 30 years of your life? Worse, to achieve that princely sum you have to make 35 years of National Insurance contributions, otherwise you might get less.

Here’s another worrier. The age at which you can claim this money is set to rise and rise. By October 2020, it will synchronise at 66 for both men and women. It will hit 67 by 2028. Thereafter it will rise with our growing life expectancy, and at some point will fly past 70 and beyond.

The state you’re in

The state will only ever give you the most threadbare income, and you will have to wait longer and longer before you can claim it. If you want to retire some point in your life, you need to start saving under your own steam.

Last year, pension provider Royal London warned that British workers will have to carry on until age 81. Unless people start seriously saving, “we are witnessing the death of retirement”, it concluded. Do you really want to be working at such an illustrious age – out of financial necessity rather than choice? 

Invest, invest, invest

If you belong to a generous workplace pension scheme, then love, honour and obey it, and feed it. Make the maximum possible contributions, even if it hurts, and in return you will get an employer top up and tax relief. However, do not assume this is enough on its own: employees pay around just 5% of their salary into a pension, they need to be saving around 15%. You need to start investing off your own bat as well. If you do NOT belong to a company scheme, saving for your future is even more important.

The older generation used to envy the young, but no longer. Student debt, spiralling house prices, stagnating wages and zero hours contracts have ruined all the fun. More than 1m Britons now turn 40 with NOTHING saved for retirement, according to pension provider Zurich. Today, it rocks to be old, at least financially. 

Forget me not

I know that investing for retirement is just another demand on your pocket. But if you don’t start early you will squander the one thing in your favour: time is on your side. If you invest £1,000 at age 30 and it grows 5% a year it will be worth £6,081 by age 67. If you invest £1,000 at 50 and it grows at the same rate, you will have just £2,292. The first pound you invest is the most valuable of all.

So, millennials, prove me wrong. Start investing now. Otherwise, retirement? You can forget it. Sorry.

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.

More on Investing Articles

Investing Articles

The National Grid share price nosedived 21% in 2 days! Is it time to take advantage?

The National Grid share price tumbled after the company surprised shareholders by revealing plans to raise more money via a…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Dividend Shares

How I’d try to ironclad my second income before interest rates fall

Jon Smith explains a couple of tactics he's looking to implement in his dividend portfolio to try and protect his…

Read more »

Investing Articles

The FTSE 100 still looks cheap to me. But don’t just take my word for it!

The FTSE 100 (INDEXFTSE:UKX) has increased 7.5% since the start of 2024. But I think there’s evidence to suggest that…

Read more »

Investing Articles

What should the Vodafone share price be? Here are 3 possible answers

Our writer uses a number of popular financial measures to come up with an estimate of a fair value for…

Read more »

Investing Articles

Here’s how much I’d have if I’d bought 1,000 shares in this FTSE 100 defence stock 5 years ago

I could have made a pretty penny investing in this leading FTSE 100 defence stock. Now I’m looking at a…

Read more »

Investing Articles

1 potential millionaire-maker UK stock I’d like to buy for the long haul

For long-term investors, here’s 1 UK stock to consider buying right now with the potential to help power a growth…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

These cheap UK shares look way too good to ignore right now

With the UK stock market reaching new highs recently, this Fool plans to grab these two remaining cheap shares before…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

This unloved UK stock could rise 120%, according to a City broker

Some City analysts reckon a once-popular UK stock can recover from its massive recent decline and go on to more…

Read more »