I don’t want the government telling me when I can retire, and I think by investing in UK stocks I can take the decision into my own hands. I count on the FTSE100 and FTSE250 to build the wealth I need to stop working at a time of my choosing.
The legal retirement age is now 66 for both men and women, but from 2026 it will start to increase to 67. Then, it will go back to 68, perhaps as early as 2037. It could eventually exceed 70, to remain affordable. I like my job but I’m not sure I want to work that long. Building a balanced portfolio of UK stocks should mean I don’t have to.
I will decide when I retire, thank you
Anyone who believes that the state will provide a decent standard of living in retirement is sadly mistaken. It’s not going to happen. The UK already spends over £100billion a year on state pensions, that’s an incredible 12% of total government spending and this proportion will increase with the aging of the population. Chancellor Rishi Sunak has already abandoned the triple lock once, and he is likely to do so again, in my view. So that’s where UK equities come in.
I am self-employed, so it is up to me to build retirement savings in my name. Nobody else will do it for me, unfortunately. I start by building a balanced portfolio covering major markets such as the US and Europe, and sectors such as small businesses. I don’t know these markets well enough to buy individual stocks, so I rely on exchange-traded funds (ETFs) and low-cost investment trusts to do the work for me. I know a bit about UK equities, though.
There are three reasons why I buy individual UK stocks instead of funds.
- They give me the opportunity to generate outperformance and beat the market.
- Direct actions are more interesting because they can move quickly (in both directions), which keeps my level of interest high.
- It’s hard (in a good way)! I like to look at UK stocks and check their potential, then see what happens to my stock picks (and how good/bad my judgment is).
This is why I buy UK stocks
Right now, I see a lot of opportunities there. I suspect we are on the cusp of a commodity boom, because of this terrible war in Ukraine. Rio Tinto tempts me. It is the same Anglo-American. I have a feeling the financial industry is ready for a comeback, and rising base rates should allow companies like Barclays and Lloyds banking group expand their net interest margins and increase their profits.
UK stocks pay some of the most generous dividends in the world. just look Vodafone, GlaxoSmithKline, Johnson Matthewand BAE systems to name a few. I will reinvest my shareholder payouts for growth today and withdraw them as income when I finally retire. It may be when I turn 65, it may be later. The important thing is that the decision is mine.
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Harvey Jones does not hold any of the shares mentioned in this article. The Motley Fool UK recommended Barclays, GlaxoSmithKline, Lloyds Banking Group and Vodafone. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we give in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of information makes us better investors.