Following on from being asked to feature in my first ever article last month on key actions required to retire early, I asked Ryan to contribute towards an article here and he provided one looking at some of the alternative investment options you might consider for retirement. Obviously everyone should do their own research and if in doubt; speak with an independent financial advisor, however it is interesting to hear about some of the other possibilities beyond the typical shares/bonds/BTL.
I know several bloggers have looked into Peer-to-peer lending with mostly positive results. Infact Weenie over at Quietly Saving has just hit her 12 month lending anniversary with a report on the results so far. However I’m also interested in hearing what other investments you guys are looking at which may not be so obvious. As always, please get in touch and let me know.
Financially Savvy ways to boost your Pension Income
We’d all like an additional income, particularly in retirement.
While some may find extra cash in part-time jobs or carrying out handy-work here and there, the more financially savvy retiree could supplement their income by investing in the stock market.
New pension reforms are allowing many retirees to get an influx of cash at the start of their retirement, before pursuing regular income via flexible drawdown methods or the purchase of an annuity.
Some of the more low risk investments can generate a health additional revenue stream for your retirement. And while the areas outlined below are not risk free, being willing to accept some volatility could have a positive impact on your income – with the help of a financial advisor of course!
GARP stands for ‘growth at a reasonable price’. Finding GARPs is a strategy that entails finding companies that show consistent earnings growth over market levels, but excludes companies with high valuations. This avoids the extremes of growth or value investing to generate a steady income.
Infrastructures are less volatile than equities such as mining and oil stocks; while growth is not guaranteed, they should be much easier to predict and will often be linked with inflation, giving you a good indication of the supplements you can get in retirement by backing them.
Renewable energy is a popular investment strategy and includes wind farms and solar. Foresight Solar for example, aims to generate a total return of 8 per cent a year. Risk lies in the political landscape, as many green energy firms are dependent on government subsidies, which have been falling as of late.
Retail bonds are small-scale corporate bonds made available for modest investments starting at just £1,000. They can be extremely popular, with one recently issued by the London Wasps rugby club paying 6.5 per cent returns until 2022.
They are less risky as you will receive the interest as well as the investment back in full if you bought when first issued, though the yield will fluctuate with changes in the bond’s price.
Preference shares give holders an entitlement to a fixed dividend from the company. Unlike ordinary shares which can be variable and uncertain, you usually simply wait until the dividend can be paid. They also do not carry a vote unless dividends fall into arrears.
Preference shares must also be paid ahead of ordinary shareholders should the company wind up.
If you’re not entirely confident about investing in the stock markets, an independent financial advisor can help you understand more about the ins and outs of trading. It’s always worth speaking to an IFA before making any large financial decisions about your retirement income, so this is an ample opportunity to see whether they can assist you in boosting it even further.
Ryan Smith is part of the content development team at Local Financial Advice, connecting people with independent financial advisors in their area, in order to reach their financial goals.