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Forget the State Pension: here are 3 simple ways to boost your retirement income

Relying on the State Pension in retirement could prove to be a major mistake for many people. It amounts to just £8,767 per year, which is unlikely to provide a comfortable standard of living across much of the UK. As a result, it’s unlikely that retirees who aim to live solely on their State Pension will enjoy financial freedom in older age.

As such, generating a second income could prove to be a wise move. It could allow you to become less reliant on the State Pension. Here are three simple ways to boost your passive income in older age.

Save less, invest more

While having cash savings is a sensible idea, having too much money in cash can be an inefficient use of capital. In other words, while having emergency money and enough to live off should your investment portfolio experience a downturn is a good idea, large amounts of cash can lead to financial challenges in the long run.

The main reason for this is that the present-day return on cash is lower than inflation. Even the highest-paying Cash ISAs currently lag inflation, which means any amounts invested in them will gradually lose spending power.

As such, investing in income-producing assets that are able to offer a higher return than inflation over the long run could be a shrewd move. While there may be a risk of capital loss in the short run, over the long term they may provide a healthier overall income return than cash.

REITs

While buy-to-let investing has proved popular in the past, tax changes and a more challenging mortgage market mean its appeal has waned in recent years.

However, many retirees may still wish to have exposure to property in order to generate a passive income. One way to achieve this goal is to purchase shares in real estate investment trusts (REITs). They’re highly liquid and allow an investor to gain exposure to a wide range of assets across a variety of market segments.

At present, it’s possible to generate a 5%+ yield from a number of FTSE 350 REITs. With the near-term prospects for the UK economy uncertain, they may now offer wide margins of safety while investor sentiment is weak.

FTSE 100 dividend stocks

While buying a FTSE 100 tracker fund is a simple means of obtaining a 4%+ dividend yield, it’s possible to generate a significantly higher income return through buying individual shares.

A number of large-cap stocks offer dividend yields in excess of 5%, or even 6% at present. In fact, there may be a sufficient number so that an investor can generate an overall return in excess of 6%, while also having a highly-diversified portfolio that reduces company-specific risk.

While there may be a risk of loss from investing in FTSE 100 dividend shares, the long-term income potential they provide could lead to an improved financial outlook compared to relying solely on the State Pension.

Who doesn’t want to achieve financial independence?

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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.