The State Pension is peanuts. Here are 3 easy ways to boost your retirement income

The State Pension is just £168.60 per week. Could you live on that little?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The State Pension – the income that’s paid to people in retirement by the UK government – is a worryingly low amount of money. Currently, it’s just £168.60 per week, and that’s if you qualify for the full amount. Many people don’t.

In fact, a recent study by Canada Life found only one-third of individuals across the UK are actually receiving the full new State Pension. According to the insurance group, around two in five pensioners are receiving less than £150 per week.

Even if you do qualify for the full State Pension payout of £168.60 per week, attempting to live off this amount alone – which one in four single pensioners is currently trying to do – could be a real struggle. Once you factor in basic living costs such as food, healthcare, and household bills, it’s unlikely there will be anything left over.

What this ultimately means is it’s extremely important to plan ahead and build up some extra income for retirement, so the State Pension is not your only source of income in later years. Here, I’ll look at three simple income strategies that could help provide a little extra income in retirement.

Equity income funds

An equity income fund is a particular type of investment fund that predominantly focuses on generating regular income payments for investors, along with a little bit of capital growth as well. Often offering yields of around 4% or so, equity income funds are extremely popular with UK retirees.

Today, there’s a broad range of equity income funds available for investors to choose from and it’s extremely easy to invest through online platforms such as Hargreaves Lansdown. If you’re looking for ideas, a good place to start could be Hargreaves’ Wealth 50 – the broker’s list of preferred funds.

Exchange-traded funds

Alternatively, you could also consider exchange-traded funds (ETFs). These aim to track a stock market index, such as the FTSE 100, and can also be an effective way of generating a second income stream.

One good example of an ETF that could provide some retirement income is the Legal & General UK Index fund. This aims to track the performance of the FTSE All Share index – a broad index of more than 600 companies – and it currently offers a yield of 4.1%, paid bi-annually. It’s available on the Hargreaves Lansdown platform with a low fee of just 0.04% per year.

Dividend stocks

Finally, a third option to consider is constructing your own portfolio of dividend stocks. These are stocks that pay out a proportion of the company’s profits to shareholders in cash on a regular basis. With these kinds of stocks, it’s quite easy to build up a passive income stream, although dividend payments are not guaranteed.

Right now, there are fantastic dividend yields on offer from well-known FTSE 100 dividend stocks. For example, Shell shares currently offer investors a yield of 5.8%. Legal & General’s yield is even higher, at around 7%.

With yields like that on offer, it shouldn’t be too hard to build up a healthy second income to boost your income in retirement.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Hargreaves Lansdown, Royal Dutch Shell and Legal & General Group. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »