Work until I’m 71? With no passive income, I might have to.
The International Longevity Centre thinks so. It just reported the retirement age for those born after 1970 will “definitely” need to go up to 71 years of age.
Judging by the state of public finances, the goalposts could keep shifting. It might be later than 71. I might never receive a State Pension at all.
These gloomy scenarios are one reason I work towards a passive income – a ‘hands-free’ source of cash to rely on as an income, pension or no pension.
I’m still early in my journey, but watching my wealth grow through stocks has been encouraging. I bought Rolls-Royce shares last year and they’re up over three times in value.
If I had to give an investing tip to my younger, more anxious self, there are three words I’d say. Oh, and I’d give him a bonus tip, too.
Overthinking
Let’s say I was looking at finance stocks. London has a giant financial services sector with a 400-year history and bigger than the rest of Europe combined.
I might think M&G (LSE: MNG) was a good buy. This firm makes billions helping people invest their savings. Those big earnings pay for a market-leading 9% yield too.
But M&G isn’t a simple business. It manages a £200bn balance sheet. It has operations across the world.
I might suffer from a touch of ‘analysis paralysis’. I’ve been guilty before of overthinking and not making a decision.
In a few years time, I’d likely regret my inaction. At 4% inflation for 30 years, every £1,000 would have the buying power of just £294.
But even with a subpar investing return – say 6% yearly – my £1,000 would snowball into £5,743.
Inflation would still eat into that, of course. But it’s at least one option to preserve and grow the money I have.
In summary, my advice to my former self would be “just get started”. I might even add a second tip to “not let perfect be the enemy of good”.
There’s plenty of resources out there to help me start – The Motley Fool being one, of course.
And on M&G, the dividend looks like one of the best of the high-yielding Footsie stocks. It might be my next buy.
How I please
More broadly, it seems we are entering a new part of human history where people will be forced to work later than ever.
When I’m 71, I don’t want to depend on the government for a retirement. And I doubt I’ll fancy catching the tube to work each morning.
Instead, I hope investing in top-notch stocks today – even if they’re not perfect – will hand me the financial buffer to spend my older days how I please.
