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Why I think FTSE 100 dividend stocks are the best way to combat a State Pension shortfall

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I doubt that you’re one of those people who are sitting back and banking on the State Pension to fund your retirement plans. You wouldn’t be here on The Motley Fool if you were.

Can you envisage yourself living on the £8,546 per year that the current pension provides? I know that I couldn’t. To put that into context, it equates to £164.30 a week, falling well short of the £550 per week that the average full-time employee in Britain earns today.

Age rising

And conditions are likely to get ever tougher for you, me and the rest of the country as we move towards retirement, particularly should an unfavourable Brexit occur and leave the public purse with a great gaping hole in it. The country’s rapidly-ageing population is already putting huge stress on the system as illustrated by new eligibility rules.

The age at which Britons will be eligible to claim the State Pension is set to rise to 66 at the start of the next decade from 65 at the moment, and again to 67 in 2028. And following the recent Cridland Report examining the future of the state-backed payout, the age for claimants will jump to 68 by 2039.

This is unlikely to be the end of the matter either. Indeed, a government report from the Department of Work and Pensions put out last year even suggested that by the mid-2050s, the age at which you may be able to claim the pension could be hiked to 70.

Protect yourself

So what’s the best way to protect yourself against pensioner poverty?

A spin of the cryptocurrency wheel? Far too volatile and a lack of regulation makes it a big no-no for me. How about buy-to-let? Better, but growing regulations and lower tax breaks here would discourage me from taking the plunge.

I’d much rather go shopping on the FTSE 100 for dividend shares in order to fund my retirement.

There’s are many reasons why the index is a great investment destination today, I believe. With sterling likely to remain under pressure in the short term at least, it’s a good idea to buy shares which report in foreign currencies, and especially in the US dollar, which looks a lot stronger right now. The index is chock full of such businesses, of course.

On top of this, the FTSE 100 is also bursting with companies with broad geographical exposure, protecting profits from bumps in one or two regions and thus putting them in great shape to keep raising the dividend and/or paying yields above the market average.

Be careful out there

That’s not to say that all Footsie income shares are on an equal footing right now, though.

I’d leave Lloyds, for example, despite its 5.8% forward yield, as well as SSE with its 8.7% corresponding reading and Kingfisher with its 4.6% yield, because of the worsening economic conditions in the UK that threaten to decimate revenues in 2019 and possibly beyond, Brexit depending.

Imposing those golden rules of international exposure and non-sterling accounting, though, I tip Unilever with its 3.2% forward yield, International Consolidated Airlines and its yield of 4.2%, and Vodafone with its prospective 8.6% yield as a few of the blue-chip dividend beauties that could make you a fortune by the time you come to hang up your work boots. But there’s plenty more where they came from, so I’d get looking today!

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Royston Wild owns shares of Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Lloyds Banking Group. 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.