The high cost of modern living means it’s sometimes hard to save for retirement. Things are particularly challenging right now as soaring energy prices and supply chain issues push prices of everyday objects through the roof.
Getting the money together to save in a cash account or invest in something like UK shares is difficult.
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The latest consumer price inflation (CPI) reading in the UK showed prices rising at their fastest pace in a decade. Senior Bank of England officials reckon CPI will move above 5% next spring too, putting even more pressure on people’s saving power.
7 out of 10 aren’t saving enough!
A report by financial services giant deVere Group reveals how unprepared many Britons are right now for retirement. It says that 70% of clients it took on in 2020 were not saving enough to be able to have the same sort of lifestyle in retirement that they have currently.
Nigel Green, CEO of deVere Group, described the shortfall as “concerning for many reasons including because we’re living longer, meaning the money we save throughout our working lives has to last longer.”
He added: “It’s unlikely that governments will be in a position to support older people like they have done for previous generations,” while the “ballooning” deficits of many company pension schemes adds an extra risk for retirees.
Why UK shares could be the answer
This all means that, as someone who’s looking to live a comfortable lifestyle in retirement, it’s imperative that I find the best way to use the money I can save each month.
I’ve chosen to park my extra cash in UK shares because of the decent rates of return I can expect. Even taking into account stock market crashes, studies show that, over the long term, stock investing tends to generate an average annual return of 8%.
This figure means that even those who are late to the investing party can expect to make a fatty sum to help them in retirement.
Let’s say I was to invest £500 in UK shares at the age of 50. By the time I reached my State Pension age of 67 there’s a good chance I’d have made a healthy £209,823 to fund my post-work lifestyle.
2 FTSE 100 shares I’m thinking of buying
This is why I continue to buy UK shares for my Stocks and Shares ISA. I don’t think I can afford not to, given the uncertainty over the State Pension and those other dangers deVere mentions.
Reckitt is a FTSE 100 share I’m thinking of buying. It has a massive range of much-loved products in food and personal care that it sells across various markets. This gives it enormous strength and great profits opportunities, despite the issue of rising costs.
I’m also considering buying SSE today. I believe its focus on renewable energy should deliver great returns as the green revolution accelerates. That’s even though power generation problems are a constant threat that could take a bite out of earnings.