Are you worried you might struggle in retirement on the 8,767 youll get from the State Pension, if youre lucky? I say lucky, because not everyone will qualify for that amount, and theres no telling how much it will be reduced to when those with 20, 30 or more years to go reach the magic retirement age (and thats rising too).
But is there really anything you can do about it with just 5 per day?
Well, these days you can still pick up a bottle of wine for around that much or less, and maybe a bottle a day could help make the pain go away? Youd also enjoy the likely added bonus of life-shortening illness, thus helping end the misery sooner.
Better plan
OK, so thats not a serious suggestion, but doesnt the state of pensions in the UK make you want to open a bottle sometimes? It does me. But thankfully, if you have some time at your disposal before you reach the magic retirement date, there are some positive differences you can make with that kind of money.
Ill tell you one thing I think you definitely shouldnt do with your daily fiver, though, and thats save it in a Cash ISA. The best easy access Cash ISA interest rates on offer today come in around 1.45%. Even though UK inflation dipped as low as 1.7% in August, that interest rate still doesnt even match it, and it guarantees youd lose money in real terms if you go that route. With a Cash ISA, youd probably end up not even being able to afford your daily bottle.
No, what you want is something that consistently beats inflation over the long term, and what Im talking about is UK shares for your pension. Yes, taking a stake in the countrys top companies has been about the best possible investment over more than a century now.
Top returns
When we combine dividends with share price appreciation, shares have typically produced total returns of around 4.5% above inflation over the very long term. And an inflation-adjusted gain of 4.5% (as opposed to an inflation-adjusted loss from a Cash ISA) can soon add up.
5 per day is, on average, 152 per month, and its very easy to invest such a sum in UK shares. Most online brokers now will welcome regular monthly savings, or one-off transfers whenever you want, and you can let the cash build up until it reaches a cost-effective amount for a share purchase I tend to think 500 to 1,000 is a good per-share amount to keep dealing costs down proportionately.
Nest egg
If you did that for just 10 years, assuming the stock market keeps on performing as it has, youd end up with 23,000. If you have 20 years at your disposal, your total would come to 58,600, and in 30 years you could reach as much as 114,000. And remember, this is all after inflation.
That 30-year total of 114,000, if left invested in shares, could generate an inflation-adjusted income of 5,130 per year, which would certainly boost your State Pension.
Just imagine what you could achieve with 10 per day!
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