The FTSE 100 has had a bumpy year, due to the coronavirus crash. I wouldn’t worry overly though. The index has endured bumpy years before, but always recovered over time.
The index of top UK stocks remains a great way of building long-term wealth for your retirement. The State Pension isn’t enough on its own. Your latter years will be a struggle if that’s your only source of income.
You can build a secondary pension fund by investing in FTSE 100 shares. Today’s a good time to buy them, because many top companies are now trading at bargain valuations.
This happens every time stock markets crash. The good companies get sold off along with the bad. If you pick your targets carefully, you can pick up shares in top FTSE 100 blue-chips at a 20% discount to just a few months ago.
I’d look at these FTSE 100 dividend heroes
The economy is hurtling towards recession, and many companies will see sales plunge. However, some should escape the worse. My favourite targets right now include consumer goods giant Unilever, spirits group Diageo, grocery chain Tesco, healthcare specialist GlaxoSmithKline, global telecoms supplier Vodafone, and oil giant BP.
I think these have the financial strength to benefit when the economy recovers. All five are standing by their dividends, for now, which is a sign of strength. You can take your income and growth free of tax, inside a Stocks and Shares ISA.
Investing in FTSE 100 shares like these is a great way to complement your State Pension. Under the triple lock, it rises each year in line with either earnings, inflation, or 2.5%, whichever is higher. Unfortunately, it only gives you a basic level of income.
Under the new State Pension, a single person gets just £175.20 a week, which is worth just £9,110 a year. That’s just a third of the average national full-time salary.
The State Pension needs back-up
Worse, you only get that if you qualify for the maximum amount, having made 35 years of qualifying National Insurance contributions. Others will get less.
That’s why you need to make your own provision. Cash in the bank will do little to boost your wealth, as it generates near zero interest. FTSE 100 shares, on the other hand, should outperform every other type of investment, over the longer run.
Now’s a good time to buy them, provided you intend to hold for the long term. Once the economy recovers, share prices should pick up further, boosted by fiscal and monetary stimulus. You can hold them for life, reinvesting the dividends for growth while you’re working. Then when you retire, draw those dividends free of tax from your ISA to top up your State Pension.
Would you like to get rich and retire early? FTSE 100 shares can help you do it.