Is it possible to retire with 300k?

shrexxy

could i retire with only three hundred thousand pounds, just say i put it into a savings account with a interest rate of 6%, i would get 18 thousand a year in interest earned (after tax its 14k). Also assume that i already own a house and that i would only spend 12k a year on living costs and i would put the extra 2k interest earned back into the savings account. is this possible, has anyone tried this, or will things like inflation and other rising cost make this unfeasible

MikeJones_2

Are you talking about £300k now, or 'x' years in the future?

Mike

shrexxy

three hundred thousand pounds

CLAPTON

given inflation is running at 4-5% you can only afford to spend about 1 or 2 % per annum if you wish to maintain the purchasing power of your savings

how old are you
how much will your state pension be
any other pension income expected

rosy

I'm not an expert on this at all - so I hope I'm not way off beam - but my first thoughts are that it's probably easier to see the bigger picture if you imagine spending your capital and interest together ( someone please tell me if I'm being too simplistic here! ).

e.g. You have worked out you need 12K a year to live on at today's prices. If you had 300K now, putting any interest back in the account and withdrawing £12K a year, then as long as your net interest rate at least matched the rate of inflation, the initial 300K would last you at least 25 years assuming you spend no more each year than the equivalent of £12K now. ( If the savings interest rate was more than the rate of inflation it would last you longer than 25 years). At the end of the 25 years or so, all the capital would be spent.

Some potential things to consider I can see are -
You might need money for more than 25 years
You won't know for sure what relative rates of tax, inflation, or interest rates will be in twenty or so years time
You would have to spend no more than the £12K you have budgeted for - what if you have unforeseen expenses ( eg health care ) in the future which would take it above that level?
Lots of other things to consider too which would work the other way too, e.g. would you have any other income in addition to this?

EdInvestor

The problem is inflation: at the end of 20 years you will need double the amount to cover costs as the money will have halved in value.

So you will have to draw on capital more and more, which will reduce income, and further deplete capital until (perhaps) you run out.

To tackle this problem it is wise to keep a portion of the money in risk-based investments which are likely to generate rising capital and income over the long term, such as equities and property.

If you have guaranteed index linked pensions (eg state pensions) to cover your basic costs, this is very helpful

shrexxy

Thanks everyone for your replies, i am only 21 years old. I'm a newbie to finances so i apologize for my lack of knowledge
This idea popped into my head the other day and i was just wondering if it would be possible, looks like ill need at least closer to 1 million pounds in a savings account if i wanted to retire at 45, thanks for your help

Anyone got any other ideas on retiring early or at least semi retiring, investing some money into high risk environments, like property is a good idea because the rise in value and the rise in rental income seems to be way above inflation.

i still don't have a pension plan, that's something I'll definitely start looking at.

chesky369

"property is a good idea because the rise in value and the rise in rental income seems to be way above inflation"

I don't know where you're living and I don't know where you've been for the last six months but round this neck of the woods, property has fallen in value; the days of viewing property as an investment for the amateur are long gone - it's only the old pros who are making money on this now. Look on the propertysnake website - houses and flats falling by as much as 47%. Not where I'd put my investment money.

dunstonh

Anyone got any other ideas on retiring early or at least semi retiring, investing some money into high risk environments, like property is a good idea because the rise in value and the rise in rental income seems to be way above inflation.

Why do you want to jump from effectively no risk (savings accounts) to high risk investments? What about all the options in between?

Also, I suggest you review your thoughts on rental income and property. Property investment hasnt been a good thing to do in this country for about 4 years now. Rental yields hit an all time low. Although they are improving again as house prices drop. The only ones that are really going to do well on property are those that know what they are doing or are builders (or very good at DIY) and can renovate a dump bought cheap and sell it on for profit (or then rent it out). Mortgaged buy to lets are also a high risk transaction as many newbie property investors are going to find out in the coming year or two.

shrexxy

i am thinking about a combination of high risk and low, just not sure on what kind of ratio to go for.

according to this house prices in this area don't seem to be going down, there still is a general upward trend. Although i am still being very wary of investing houses i do think its still a good idea to invest when the market has stabilized probably in a few years time.

TMFTP

As a side observation, it's a VERY good way to start thinking about your retirement - "What income do I need to live on?"

A lot of problems happen as people toddle through life, realise they're 50+, look at the fund they have, realise how much (little) it'll give them, then have to work out how to live on what they're going to earn. Which is all backwards.

Thinking what you're going to need at retirement when you're 21 means you're in control of how to go about getting it.

Good on you, shrexxy.