Retirement savings: I’d buy cheap UK shares today to beat your State Pension worries

With the State Pension age continuing to rise, building a retirement savings portfolio is likely to become increasingly important for many people.

Assets such as buy-to-let property, cash, bonds and gold may seem appealing after the recent stock market crash. However, investing money in UK shares while they’re trading at cheap prices could be a better idea.

Through building a diverse portfolio of stocks, you could enjoy a robust passive income in older age that offers financial freedom.

State Pension challenges

As well as a rising State Pension age, the amount paid to retirees is relatively disappointing. At present, it amounts to around £9,110 per year. That’s around a third of the average salary in the UK. As such, it’s unlikely to provide most people with enough money to pay all necessary bills and expenditures each month.

Furthermore, there’s a real threat the rate at which pension payments rise could be reduced in the coming years. The cost of coronavirus may lead to spending cuts and/or tax rises. This may mean that having a passive income in retirement becomes even more important. Therefore, starting to build a nest egg as early as possible may be a sound move.

Buying UK shares after the stock market crash

Clearly, there are a wide range of assets that can be purchased to overcome a disappointing State Pension. However, UK shares could prove to be a more attractive option than other popular assets. Following the stock market crash, many high-quality companies trade at low prices.

They could deliver sound recoveries that have a positive impact on your portfolio’s growth rate. And, with the stock market having always recovered from its declines to post new highs, a turnaround in indexes such as the FTSE 100 seems likely.

By contrast, low interest rates mean the return prospects of cash and bonds are low. They may not be able to improve your prospects of overcoming the disappointing State Pension. Buy-to-let property is expensive to buy due to high house prices. Meanwhile, gold’s recent surge means that factors such as low interest rates and an uncertain near-term economic outlook may already be accounted for in its price.

Building a retirement portfolio

Of course, UK shares face an uncertain future. As such, buying a diverse range of companies within your portfolio could provide a more robust outlook that increases your chances of obtaining a passive income to supplement the State Pension.

Furthermore, buying high-quality companies with solid market positions and strong balance sheets may further reduce your risks. They may be better able to deliver profit growth as the economy recovers. They may also be able to capitalise on new opportunities.

In doing so, they could outperform the wider stock market. And that will help you to build a retirement savings portfolio that provides a generous passive income in older age.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

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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.

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