Forget the State Pension, here’s how I want to plan my retirement

The UK State Pension can give us a start to retirement, and it’s a nice thing to have. But the more we can add to it, the better, right?

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.

Mature couple at the beach

Image source: Getty Images

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.

It’s easy to knock the State Pension, but I don’t want to do that. In fact, I consider myself lucky to live in a country that offers one at all.

But we want a bit of comfort when we retire, don’t we? So it makes sense to put away a bit more cash during our working lies.

That might mean paying extra into company pensions. Or putting cash in a Self-Invested Person Pension (SIPP) or an Individual Savings Account (ISA).

I choose shares

SIPPs and ISAs have different benefits, but I like one thing about them both. We can use them to hold shares in great British companies — and that’s my long-term choice.

I won’t try to make the case for buying shares here. Well, other than to point out that the UK stock market has beaten other forms of investment for more than a century.

It’s a choice individuals must make for themselves, based on their own needs, approach to risk, and all sorts of personal things.

Today, I just want to look at one question we often hear asked.

Drawing the cash?

It’s all very well going on about investing for the long term, for the decades ahead. And ignoring what happens in the short term. But we don’t live forever, and one day we’ll want to take the cash, right? So how do we do that?

Again, we’ll all have our own preferred strategy for drawing down retirement cash. And I can’t tell you what to do. But I can tell you the way I plan to approach it.

Firstly, I invest mostly in dividend stocks, so in a way that can make it bit easier as they already pay income.

So maybe all I need to do is stop buying new shares with my dividends, and just take the cash instead.

Lowering risk

But I’d still face risk. And when I’m relying on the cash for short-term spending, that’s not good.

Imagine I’d retired in 2019, and held bank stocks (which I do). And they all had to stop their dividends in the pandemic. Eek!

I plan to reduce my risk in two steps.

First is to move my cash to investment trusts. The closer I get to when I want to stop work, the more I’ll move.


I already bought some City of London Investment Trust shares. It holds Shell, Unilever, BAE Systems… and a lot more FTSE 100 dividend stocks.

It’s lifted its dividends for 57 years in a row. And it’s currently on a yield of about 5.2%.

So I get diversification and a dividend track record in one. And I’ll move more and more of my money to trusts like this as the years pass.

Keep some cash

That’s still no guarantee that I won’t suffer future dividend cuts. So I intend to sell enough shares to keep at least a few months of income in cash, to provide a backup.

I’m not sure how much safety in cash I’ll go for. That will depend on how much I have when the time comes.

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.

Alan Oscroft has positions in City Of London Investment Trust Plc. The Motley Fool UK has recommended BAE Systems and Unilever Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Down 23%! Should I buy more CrowdStrike shares for my Stocks and Shares ISA?

Sometimes bad news can be good news for long-term investors. But is that the case for CrowdStrike in relation to…

Read more »

Investing Articles

2 UK shares near 52-week lows I’m considering snapping up

These UK shares are loitering near, or at, 52-week lows. Are these prime opportunities for our writer to boost her…

Read more »

Investing Articles

Unilever: a passive income stock with potential for decades of dividend growth

Stephen Wright thinks Unilever can keep reducing its share count for years to come. And this should help make it…

Read more »

Middle-aged black male working at home desk
Investing Articles

Worried about retirement? I’d buy high-yield dividend shares to build wealth

The number of pensioners enduring poverty in the UK looks set to rise. Investing in dividend shares could help Britons…

Read more »

Investing For Beginners

2 boring but beautiful FTSE 100 stocks to add to my ISA

Jon Smith runs over a couple of FTSE 100 stocks that he really likes the look of, even though they…

Read more »

Investing Articles

Here’s how I could supercharge my wealth by snapping up the best dividend stocks!

This Fool explains how dividend stocks play a crucial part of her aspirations to build wealth, and details one pick…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Revenue up 10% and accelerated growth potential for this overlooked FTSE 250 company

Today's first-quarter update from this good-value FTSE 250 company keeps me keen on the stock as recovery and growth continues.

Read more »

Investing Articles

Here’s why I’m so bullish about the BT share price now

The BT share price shot up after FY results, and a couple of months on it's still up there. Might…

Read more »