The UK’s State Pension can be an important part of many people’s financial planning for retirement. And I’m looking forward to receiving mine when the time comes.
However, today’s rate is £179.60 per week. But the actual amount an individual will receive depends on their National Insurance record.
It’s not a lot of money. And it falls short of the income many people will earn from working. So, for me, it’s essential to boost income in retirement from another source. And I choose to achieve that by investing in FTSE shares and other stocks now before I retire.
3 easy ways with FTSE shares and other stocks
So I’m building up an investment pot in both my Self-Invested Personal pension (SIPP) and my Stocks and Shares ISA. And I’m reinvesting all gains now. But when the time comes to retire, I plan to draw from those accounts to increase my retirement income.
In terms of strategy, I’m approaching my programme of investment in three easy ways. The first is by aiming to replicate the overall returns of the stock market over time. And to do that I allocate a portion of my investment money each month to low-cost index tracker funds. There are many to choose between, but I invest in funds following large-, medium- and small-cap shares in the UK and America.
Secondly, I invest in managed investment trusts. For example, the Finsbury Growth and Income Trust, which is run by Warren Buffett-influenced investor Nick Train. And I also invest in the Smithson Investment Trust focused on global small and mid-sized companies as well as the Fundsmith Emerging Equities Trust. Both trusts were started by the Fundsmith investment house. And they aim to replicate the investment approach taken by its chief executive, Terry Smith — he’s another successful investor influenced by Buffett.
However, although I’ve chosen those trusts, there are many options available on the London stock market. And even many of those run by lesser-known managers have a strong track record and are worth consideration.
Aiming for higher returns
The third way I’m approaching my investment programme is by targeting the shares of individual UK FTSE companies. The first considerations for me when selecting businesses in which to invest are quality, growth potential and valuation.
I want to find enterprises with attractive characteristics and a long growth runway. Then I aim to buy the shares when they represent a valuation that makes sense for a long-term investment. My aim is to hold stocks as the businesses behind them compound their earnings year after year and add value to my investments.
There are no guarantees of positive investment performance because all shares carry risks as well as positive potential. But my tactics involve reinvesting all gains along the way, such as those from shareholder dividends. And in that way, my expectation is that the compounding effect will drive decent returns over time. And the eventual investment pot of money will likely be capable of helping to finance my retirement in years to come.
