The ongoing cost-of-living crisis is devastating Britons’ plans for retirement. Higher bills are giving people less money to invest — in UK stocks and other assets — or to save for their later years.
According to Annuity Ready, just 28% of ‘Generation X’ are on course to meet a savings target “that would allow them to live comfortably throughout retirement“.
This demographic comprises those born between 1965 and 1980.
As a result, a staggering 17% of Gen Xers fear they won’t be able to retire at all, with almost four in five of those (78%) predicting they won’t have enough money saved to stop working.
Could building a portfolio of shares and other exchange-traded securities help them turn around their fortunes?
Retirement fears
Gen Xers say that lack of access to final salary pension schemes, and the fact that auto-enrolment has only been introduced recently, will have an impact on their pension savings. They also voice fears over the future cost of living, along with the level and availability of the State Pension.
The 45-to-60-year-old age group is by far the most pessimistic in the UK. But other demographics are also in danger of missing their savings objectives.
According to Annuity Ready, the percentage of people who are on track for a comfortable retirement stands at:
- 50% for Generation Z (those born between 2001 and 2020)
- 47% for Millennials (born between 1981 and 2000)
- 37% for Baby Boomers (born between 1946 and 1964)
In total, only four in 10 survey respondents say their retirement savings goals are on track.
Buying UK stocks
It goes without saying that the earlier one begins planning for retirement, the better the chances of hitting one’s goals. This is thanks to the mathematical miracle that is compounding, where — over the long term — savers and investors can exponentially grow their wealth by making a return on all their past returns.
However, even Gen Xers who are late to the party can build a healthy nest egg with the right strategy. Investing in UK shares, where someone can realistically target an average annual return of 8%, is one I think’s worth considering.
Let’s say a 45-year-old starts their investing journey by putting £500 a month in British stocks. If they can hit that 8% figure, they’d have built a decent portfolio worth £394,366 by the time they reach the State Pension age of 68.
Trust time
A simple way to target a return like this could be to invest in a UK-listed trust that holds a collection of stocks.
The F&C Investment Trust (LSE:FCIT) is one such investment trust I think’s worth considering. It has holdings in more than 400 companies from across the globe, providing excellent diversification by geography and industry.
Major holdings here include tech giants Microsoft, Nvidia, Apple, and Amazon. This can adversely impact returns during economic downturns. But it has also delivered excellent long-term gains as the digital revolution has continued.
Taking a diversified approach like this provides a chance to generate wealth in a low-risk way. But that’s not to say that returns are mediocre. The F&C trust has delivered an average annual return of around 10.9% over the past decade.
If this continues, a £500 investment here would make our 45-year-old an even larger nest egg than that £394,366 by the time they retire.
