Starting at 46, how much would need to be invested in the FTSE 100 to have £445k by retirement?

The retirement age in the UK is currently 66, but it will likely rise in the future. Regardless of the age at which one retires, if an investor had at least a couple of decades before hitting the official age, one consideration is likely to be building a retirement pot. One strategy could be to buy FTSE 100 stocks that could provide dividend income and share price appreciation. Here’s how this could be possible and one specific idea to consider.

The strategy

There are various types of stocks in the FTSE 100. Yet, with a 20-year time horizon, I’d be leaning towards having the most exposure in growth stocks (maybe 60%-70%). Even though growth stocks can be risky, over the long term the returns tend to be higher than value stocks. So if this strategy were just to run for a couple of years, I’d reduce the allocation. But given we’re talking about decades, I feel more comfortable targeting this area.

For the other 30%-40%, I’d suggest adding dividend stocks. One reason for this is the income element it provides. Over the coming years, an investor will likely add more cash to the portfolio. Yet having an income stream from dividend stocks at the same time provides cash that can be immediately reinvested.

Alongside this, dividend shares tend to be more mature companies. This can help to offset some of the volatility from growth shares. However, it’s important to remember that dividends aren’t guaranteed, so it’s always best to be conservative when forecasting the potential income from here.

Money in the bank

One example of a growth stock (but one that’s also quite mature) is NatWest Group (LSE:NWG). The share price has rallied by 93% over the past year, putting it in the spotlight.

There have been several reasons for the surge over this period. One has been strong financial performance. Profit before tax for 2024 hit £6.2bn, and although this was only modestly above the 2023 figure, 2023 was a standout year for the company. It made progress with other metrics, such as having 79% of retail customers banking entirely digitally.

NatWest has been expanding, with deals struck last year with Metro Bank and the Sainsbury’s banking arm. This provides a larger footprint that it can grow from in the coming years.

Finally, the UK government has been progressively selling its shares in the bank. Investors have received this continued reduction positively, signalling increased confidence in the firm’s autonomy and future prospects.

One risk with this stock is that if UK interest rates fall this year, it could negatively impact revenue. That’s because the margin it makes between the deposit rate and the lending rate shrinks.

The end goal

If an investor put away £750 a month in a portfolio that was assumed to grow at 8% a year (via a mix of dividend yield and share price appreciation), the pot could quickly grow. By age 66, it could be worth just over £445k. If the retirement age is later, the pot could be worth more. At the official retirement age, the investor could look to take some of the money or let the portfolio keep growing. It’s important to remember that these are just projections, but it goes some way to showing what could be possible.

The post Starting at 46, how much would need to be invested in the FTSE 100 to have £445k by retirement? appeared first on The Motley Fool UK.

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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended J Sainsbury Plc. 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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