Born between 1958 and 1968 and have no pension or retirement savings? Read this now

In your 50s and have nothing saved for retirement? It’s not too late to do something about it.

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.

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Research into the finances of Britons aged between 50 and 60 reveals that many people have low or even no retirements savings. For example, a study by insurance specialist Aegon last year found that the average 55-year-old British adult has retirement savings of £105,000, which, given modern life-expectancy, might only equate to an income stream of around £5,000 or so per year in retirement. Another recent study by Skipton Building Society revealed that, worryingly, up to one in 10 Britons aged 55 have nothing saved at all for retirement.

However, the good news is that if you’re in your 50s now, or even 60, and have very little in the way of a pension or savings, it’s not too late to do something about it. With the help of the stock market, you could still potentially build up a nest egg that will provide you with a healthy income stream in your golden years. Your savings might even grow faster than you think.

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Wealth generation

While past performance is no guarantee of future performance, studies into stock market performance have generally concluded that stocks are capable of providing annual returns of around 7%-10% per year over the long term. For example, analysts at Hargreaves Lansdown last year found that £10,000 invested in the FTSE 100 – the index of the UK’s largest 100 stocks – for 30 years between August 1987 and August 2017 grew at an annual rate of around 8.2%.

So let’s look at how much capital you could potentially build up if you put your money to work in the stock market and invested regularly in the lead up to retirement, assuming a retirement age of 68. Here are some basic back-of-the-envelope calculations.

Starting aged 50

According to my calculations, an individual saving £500 per month between the ages of 50 and 68, could generate a savings pot of around £200,000 by age 68 assuming a 7% return per year. If stocks delivered a 10% return per year over that time frame, the savings pot could reach nearly £275,000. That could make a big difference to your retirement. 

Starting aged 55

Similarly, an individual who saved £500 per month between the ages of 55 and 68, could build up a nest egg of around £120,000 by age 68 if the stock market produced average returns of 7% per year. If returns were as high as 10% per year, the individual’s £500 per month investment could grow to nearly £150,000 by age 68.

Starting aged 60

Even starting at age 60 could help you achieve a more comfortable retirement. £500 invested every month and growing at 7% per year could grow to around £60,000 by age 68, or nearly £70,000 if returns averaged 10%. 

No guarantees

Of course, it’s important to remember that there are no guarantees when it comes to stock market performance. Returns can vary significantly from year to year and can even be negative at times. However, as a long-term wealth generation tool, there simply aren’t many better proven alternatives. Put a regular savings and investment plan in place today, and you may be able to boost your retirement savings considerably and enjoy a more comfortable retirement.

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