No savings for 50? How to target a second income of £13,295 in retirement by investing £100 a week
Image source: Getty Images
Regardless of what you think the future of the State pension looks like, having a second income in retirement can only be a good thing. And it’s amazing what can happen.
According to the Financial Conduct Authority (FCA) around 10% of adults have no savings at all. But even for someone in that position at 50, it’s never too late to do something meaningful.
What happened?
The point of investing in the stock market is to make money. More precisely, it’s doing better than you would by buying bonds or keeping your money in savings.
Last year i FTSE 100 made more than 20% profit. That ticks the box for making money, but investors who expect that every year may be disappointed.
There are years when stock prices fall and investments made in January are worth less in December. That doesn’t happen with money and it’s an important thing to be aware of.
Over the past 10 years, the average annual return from the FTSE 100 has been just over 8%. And this is more than enough to enable one to make impressive gains over time.
No savings for 50?
A person with no savings at the age of 50 is eligible for a State pension in 17 years. But that’s a lot of time to try to build an investment that can create a secondary income.
One of the best ways to invest is to set aside money in a regular income. And from the start, investing £100 a week can lead to something significant.
At 8% per annum an investment of £100 a week turns into £182,306. And that could be enough to generate an annual return of £13,295, which the investor could use as a secondary income.
The obvious question then is which stocks one should consider buying in order to aim for this kind of return. Fortunately, I think a few potential names stand out right now.
An opportunity for the FTSE 100?
The first Rentokil (LSE:RTO) is a stock I hold in my portfolio. It’s not the most exciting thing, but I think the pest control industry is likely to be one of the most durable going forward.
The firm also has a strong competitive position. Consolidation over the past few years has helped it achieve greater density than its competitors, which should result in higher margins over time.
No stock is completely risk free. And Rentokil shareholders need to be aware of potential changes in the law, which could make things more expensive or more difficult in the future.
It’s worth noting, however, that the stock trades at a significant discount to its biggest rival. Because of that, I think it’s a relatively attractive way to invest in an incredibly resilient industry.
The stock market
Investing in the stock market can be a great way to build wealth over the long term. And anyone looking for a second income can look into using this to their advantage.
Startups don’t take huge amounts of money. The most important thing is to consider what you can invest in.
I think the key is to find out which businesses will still be doing well 10 or 20 years from now. And Rentokil is one name that I think should be on investors’ radars.
