Trying to beat the rising State Pension age may seem to be a challenging task at times. After all, it is due to rise to 68 over the next two decades, with a longer life expectancy making an even higher State Pension age increasingly likely beyond the next 20 years.
This could make it more difficult to retire early. However, it is not an impossible task. The FTSE 100 appears to offer a wide range of income-producing stocks with growth potential that trade on low valuations. Buying a diverse range of them today could improve your prospects of beating the State Pension in the long run.
With the outlook for the world economy being relatively uncertain at the present time, there may be buying opportunities for long-term investors. Fears surrounding risks such as US political uncertainty and the continued increases in tariffs have caused investors to demand a wider margin of safety across the FTSE 100 over recent months.
While this may mean there is some volatility in the short run, in the long run it could produce impressive overall returns for investors. The FTSE 100 itself offers a dividend yield in excess of 4%, which is above its long-term average. This could mean that it is undervalued, thereby offering long-term investors the opportunity to buy high-quality businesses at low prices.
Many of the index’s members offer even higher yields than the index. Since a large proportion of total returns have historically been generated by dividends, it could be a good idea to focus your capital on high-yielding shares that offer a solid track record of dividend growth. They may offer defensive appeal, as well as increasing popularity due to low interest rates, which allows them to outperform the wider index.
Global growth potential
Although the risks facing the world economy have increased over recent months, the long-term potential for growth remains high. Emerging markets are forecast to benefit from increasing wages that could create opportunities for consumer-focused businesses to capitalise on a growing middle-class.
As such, focusing your capital on global businesses that offer diversity and access to fast-growing markets could be a shrewd move. They may help you to overcome localised risks such as Brexit and a weak outlook for the EU economy. Since the growth forecasts for major economies such as China and India have been lowered recently, investor sentiment towards companies operating in those economies may be less positive than it has been in the past. This could produce high returns for value investors in the long run.
In terms of the long-term growth potential offered by the FTSE 100, an investment of £10k could produce a surprisingly large nest egg in the long run.
Assuming an annualised total return of 8% and a 30-year time period, a £10k investment in the FTSE 100 could produce a retirement portfolio of £100k. While this may not be enough on its own to retire, making additional contributions to your pension during your working life, investing in dividend shares, as well as focusing on international growth opportunities could help you to beat the State Pension.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.