I can’t imagine having to get by on £179.60 a week. But that’s the reality for millions of pensioners who only have the State Pension to rely on. That’s assuming they have made enough contributions during their working life to claim the full amount.
I don’t expect things to get any better by the time I come to retire. Britain’s population is rapidly ageing and the financial burden of this is having a direct impact on the State Pension. The economic consequences of Covid-19 is causing lawmakers to consider scaling back support for elderly citizens even further as well.
Fresh State Pension danger?
The age at which people can claim the State Pension rose to 66 last year. And, under current laws, extra increases are planned for the next couple of decades. The age at which people can claim will increase to 67 between 2026 and 2028, and again to 68 between 2044 and 2046.
However, a recently-launched government review could bring forward that target retirement age of 68 by several years. A recommendation on raising the age between 2037 and 2039 will be released in May 2023.
Why I buy UK shares
It may not happen, of course. But even if it doesn’t, my retirement date has already been pushed back. Yet I want to take control over when I’ll be able to hang up my proverbial work gloves. And I want to know that I’ll have the financial means to live comfortably when I do eventually retire.
This is why I’ve chosen to invest in UK shares to build a nest egg for retirement. According to the Pensions and Lifetime Savings Association, an individual would need £33,600 a year to live comfortably once they finish work. At current levels, the State Pension pays less that a third of that (£9,339.20, to be precise).
Retiring in comfort
That leaves a big shortfall to make up. But I’m confident that my investment strategy will enable me to enjoy a comfortable retirement. Long-term investors like me tend to receive an annual average return of 8%. Those that buy UK shares with a view to holding them for, say, a decade or more have a good chance of making a good stack of cash.
History shows us that I don’t have to spend a massive amount of cash to safeguard my retirement plans either. Let’s say I was to start investing £300 a month when I’m 30. By the time I reach 65, I could realistically expect to have built a cash pot of £642,770 with which to fund my post-work lifestyle.
This is why I’ll continue to buy UK shares in spite of the uncertain economic outlook for 2022. Sure, more stock market volatility could be in store this year. But over the long term, investing in stocks is a great way to try and make a decent pile of cash. And this is more important than ever as pressures on the State Pension only increase.
