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Forget buy-to-let! I’d buy these 2 FTSE 100 stocks today to retire on a passive income

The FTSE 100’s recent decline could mean that it now offers even better value for money compared to buy-to-let properties. A number of large-cap shares currently offer wide margins of safety, and may be a better means of building a retirement nest egg from which to draw a passive income in older age.

With that in mind, here are two FTSE 100 shares that could be worth buying today. They appear to offer long-term growth potential, improving dividend prospects and low valuations that could catalyse your retirement outlook.

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The recent results from Berkeley Group (LSE: BKG) highlighted the company’s long-term growth potential. It currently builds around 10% of London’s new homes, and is among a small number of housebuilders that  are able to take on long-term development projects. They could yield high returns at a time when London’s housing supply is relatively low.

Looking ahead, economic conditions in the UK could hold back investor sentiment towards the stock in the near term. However, in the long run, its track record of delivering high-quality developments and using the cyclicality of the housing market to its advantage may lead to increased demand from investors for its shares.

Berkeley currently trades on a price-to-earnings (P/E) ratio of 14.1. It has a generous capital return plan, and may provide a relatively consistent dividend outlook over the coming years. As such, while its 4% forecast rise in net profit next year may not ignite investor interest on a large scale, the stock has the potential to deliver impressive total returns in the long run that boost your retirement prospects.


Another FTSE 100 share that has long-term total return potential is BAE (LSE: BA). The aerospace and defence company recently reported full-year results that were in line with expectations, while acquisitions and investment could strengthen its financial performance in the coming years.

The aerospace and defence industry is experiencing a period of stronger growth compared to its recent past. Defence spending across countries with the largest military budgets, such as the US, is expected to grow over the long run. This could provide a boost to the company’s financial performance, while its expansion into new markets may broaden its profit potential.

Trading on a P/E ratio of 12.6, BAE seems to offer good value for money at the present time. Certainly, coronavirus could have a negative impact on the prospects for the global economy, and may cause investor sentiment towards a wide range of companies to decline in the short run. But BAE’s strong position in the defence industry and the prospect of a recovery in FTSE 100 share prices may mean that now is an opportune moment to buy a slice of the business. It could help you to build a retirement nest egg from which to generate a passive income in older age.

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It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.

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Peter Stephens owns shares of BAE Systems and Berkeley Group Holdings. 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.