Income in retirement? An early start could pay dividends.

We all want our retirement income to be enough for the life we’d like. That means an income that has the potential to increase over time, keeping up with rising living costs – and with the resilience to ride out any difficult economic conditions along the way. In the short-term, share prices can be volatile and can fall as well as rise at any time. But history shows that investing in FTSE 100 companies has provided long-term growth for investors.

The Merchants Trust is no stranger to early starts – we began investing in 1889. We buy stocks mainly in FTSE 100 companies with the aim of providing a rising income as well as long term capital growth. And because we are an investment trust, Merchants is able to draw on revenue reserves to support dividend payments in tough times. Although past performance is no guide to the future, we’ve paid a rising dividend to shareholders for 33 consecutive years. But the longer you wait to start investing, the more you may miss out on the potential benefits of compound growth.

Compound growth occurs when the income earned from an investment, in the form of dividends, is re-invested to buy more shares rather than taken out. Owning more shares means more dividends the next time they are paid, which in turn are re-invested to buy more shares.

During your working life, you may have less need for additional income as your job already pays you a salary. Buying shares in the Merchants Trust and re-investing any income to buy more shares can lead to a greater potential income in the form of dividends when you do retire and actually need it. And the earlier you start, the better.

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. Past performance is not a reliable indicator of future returns.