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When it comes to planning for an income in retirement, the best time to start always seems to be yesterday, right?
Well, it’s not too late, but moving on and deciding what to do can be difficult. I mean there are many options. Most are magical, but two seem to get more attention.
One is to invest in property to generate real estate income from rentals. Another is to buy shares in UK companies, especially dividend stocks. I’ve done both, and now I prefer shares.
I am not knocking property. I have a rental house, and it is generating a reasonable income. As the years go by, however, it is distorted. I’ve had empties and bad tenants. I had one person who was in arrears on a month’s rent and I took everything that was portable, including the light bulbs.
People often think of bricks and mortar as solid and reliable, but they see stocks as volatile things that can be here today and gone tomorrow. And some shares can be like that.
Regardless (incidentally, it hasn’t made any profit yet, but it’s sure to make you rich) Want to invest in some high-flying digital asset development company? Well, good luck to the investors, you want it. My £5 a day doesn’t go anywhere near that.
But despite these high-risk ‘jam tomorrow’ stocks, there are plenty of solid ones generating cash today. If I buy Tesco Shares, I don’t own a bit of paper or a curved line on a graph. I own an actual part of the UK’s largest supermarket chain. I can visit and think.”This part is mine.“.
So, 5 pounds a day, what can it give me?
Stocks and Shares ISA
Well, I can share £1,825 a year. And a stocks and shares ISA is very easy to set up and operate.
I don’t think an average return of 8% per year from stocks is too unreasonable. Every year will not be good. Some years I lose money.
But I’ve had more luck achieving my goals by taking a long-term investment approach. At 8% per annum, with dividends reinvested, my £5 a day could turn into half a million pounds in 40 years.
Now, as of today, I will not be 40 years old. But it is realistic for young people. And seniors can do a few things to boost their returns. One is simply to invest more.
Another is to increase the amount we invest periodically. Maybe 5% per year. Maybe every time we get a raise (remember those?) or avoid any windfall.
For seniors, it may be too late to build half a million in retirement. But with steady investing, realistic goals, I’m sure we can create a nice little static income in retirement.
And it has to be better than some of the crap out there. I mean, some people sell stock photos through photo agencies. I have a few thousand photos of myself uploaded with them. My total income so far? £6 could buy at least two shares of Tesco.