If you haven’t built up much retirement savings at age 40, you’re not alone. Living costs have been rising faster than wages, and there are so many other calls on your pocket.
The good news is you still have time to build a healthy pot of money, by investing tax-free through your Stocks and Shares ISA allowance. And there’s plenty of opportunities out there right now.
As ever, there are risks, such as Middle East tensions and the global trade war, but world markets nonetheless rose more than 25% last year. Equities typically shrug off short-term problems like these, to post strong growth in the long run.
I think investment trusts are a good way to invest, as they tap into global growth and income opportunities. Here are two that could help you retire on a rising passive income.
Edinburgh Investment Trust
Edinburgh Investment Trust (LSE: EDIN) invests in the UK equity income sector, which means it aims to generate both capital growth and a rising dividend income, in this case from investing in the FTSE All-Share. Its long-term performance has been strong, delivering a total return of 156% over 10 years, according to the Association of Investment Companies.
There’s another attraction too. By investing in a spread of income-generating stocks, such as BP, Royal Dutch Shell, and Legal & General Group, Edinburgh generates a healthy yield of 4.55% a year. That’s far more than you’ll get on a Cash ISA, where even the best buy rates pay little more than 1%.
UK shares have underperformed global stock markets because of Brexit uncertainty, and I think they could now start catching up. This could make today a good time to buy this fund, ahead of the next surge in share values.
A big attraction of UK equity income investment trusts is they aim to increase their dividend payout every single year. Edinburgh has lifted its for the last 14 years. You can reinvest those dividends for growth and, when you retire, have a growing, passive income to live off.
As well as investing in the UK, it could pay to spread your wings internationally. Murray International Trust (LSE: MYI) can help you do that, because it’s a global fund across Asia Pacific, North America, emerging markets and Europe, with less than a 10th of its portfolio invested in the UK.
Top holdings include renowned companies such as Taiwan Semiconductor, Swiss pharmaceutical firm Roche Holdings and US tobacco giant Philip Morris International, which means it could balance the UK-focused Edinburgh investment trust nicely in your portfolio.
Murray has also delivered a strong performance, with a total return of 150% measured over 10 years and, better still, offers a generous income. It currently yields 4.21% and has a great long-term track record of increasing its dividend every year.
So if you’re 40 and don’t have any savings, these two trusts could help you play catch-up and build a passive income for a happier retirement.
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Harvey Jones 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.