How I think you could double your State Pension for £50 per week

Do you really fancy spending your retirement years struggling to get by on a State Pension of 8,500 per year? I know I dont.

Wouldnt you be a lot more comfortable on twice that, at 17,000 a year? Once we reach retirement age, most peoples mortgages are paid, our offspring have long fled the nest, and living expenses should be significantly reduced.

In fact, some estimates suggest costs of going to work travel, food, clothing, etc can easily consume 10% of your net income. That can easily come to around 2,500 a year or more, and thats a big chunk extra for funding your retirement years. Yes, I reckon I could live pretty decently on around 17,000 per year.

Salary

Average take-home pay in the UK is around 450 per week these days (or possibly a bit more depending on who you ask, but Im being conservative here). How much of that do you think youd need to invest in order to double your pension income?

If you have 30 years before youre set to retire, it could be as little as 50 per week. Let me explain.

Im basing my calculation on investing in FTSE 100 companies, specifically those that pay dividends. And Im thinking about what yields youre likely to get and how much youd need to have accumulated by the time you retire.

FTSE yield

The FTSE 100 as a whole is expected to provide a dividend yield of 4.9% in 2019. Now thats something of a record and yields like that are unlikely to be maintained over the long term. And I do think its a sign of shares being underpriced right now and that were possibly in one of the best times to invest Ive seen for some years but thats a digression.

By buying only shares that pay decent dividends, you should be able to get a better yield on your portfolio than the Footsie average. But again Ill be conservative, to accommodate dividend yields falling in future years, and to allow for companies occasionally facing hard times and having to cut their dividends as happened to financial stocks during the banking crisis.

Even with all of that, I think a portfolio with an overall yield of 4.5% should be relatively easy to achieve. What sum would you need to generate the 8,500 per year required to double your State Pension? Approximately 189,000, but lets target a retirement pot of 200,000 to be on the safe side.

How long?

What if you could manage an average long-term total return (thats dividends plus share price gains) of 6% per year over the next few decades? I reckon 6% is, again, well within the bounds of possibility.

Investing 50 per week with a 6% total annual return would get you over the 200,000 mark in 30 years. So if youre aged 30 and hope to retire at 60, getting started now should see you make it.

And if you can invest more (say, if you earn better than average wages), 100 per week at the same rate of return would get you 200,000 in just 21 years or a pot of more than 400,000 over 30 years.

You could then take your dividends to live on, and still have a growing stash of capital untouched.