How much investment is required to make £500 per month?

wonder_lander

How much money would I require to invest regularly make £500 per month either tax free or after tax for a basic rate tax payer? Plus how would you do it?

gmtomkins

You would need to deposit about £125k to achieve a monthly net income of £500.

ray123

You would also need to take into effect the RPI, inflation, deflation of your money etc...

dunstonh

It would also depend on the type of investments you want to utilise, your tax position and risk profile.

inflation is the big threat to those taking a regular withdrawal. So, that needs to be factored in as well.

Reaper

I wonder if you mean investment or savings?

If you mean savings (ie no risk) then what matters is how much extra you can get on top of inflation. So, for example, if your savings are paying you 1% more than inflation then (ignoring tax for now) you would need to have £600,000 to get your monthy income without it declining in value over the years.

The simple option is savings accounts with bank/building societies, but there are plenty of other options depending on your cirumstances. If you are looking to plan your retirement then there are pension policies and annuities. There are many more options if you are willing to take some level of risk in exchange for better returns.

wonder_lander

Thanks for the replies guys.

I was just wondering what sort of investment I would need to generate that amount regularly. I have 55k in a very poor savings account at the moment (my mum recently passed away and I've not felt up to sorting out the best place to put / invest the money) and it was acheiving about £120 per month in interest.

My wife used to work and bring home about £500 per month and I wondered if I could make the money work to provide her with an income of what she was making whilst out at work, that make sense?

jamesd

Are you willing to see temporary decreases in capital value that might last for five years? If so, by how much? 10%? 20%? 40%? More? If you select 20-40% you could use quite a high proportion of unit trusts investing in shares, lower levels might involve more in corporate bonds (not savings account bonds) to reduce the total up and down variation in value.

If you're not willing to see any variation in value that would limit you mainly to savings accounts and some National Savings products.

What sort of notice an you give for access to some or all of it? Are you willing to accept a lower value for early access without notice (selling share-based investments at a bad time, say)? If you can accept notice for a while you can use term savings accounts (often called savings bonds) and some National Savings products, as well as share-based unit trusts if you'll take the risk of selling when the value is reduced if something unexpected happens.

Pretty much routine guidance for this is to start out by using both cash and stocks and shares ISA allowances (S&S has many options besides shares, with varying risk, and can even be in taxable cash for a while). The idea is to get all of the money into tax protected things as fast as possible, so tax long term isn't a factor.

Is either of you over 50 now? Either a higher rate tax payer?

Either of you not paying tax at all now (sounds like your wife may not be paying tax), so you could get savings interest paid free of tax provided it doesn't go over the personal allowance? Sounds as though your wife could use regular savings accounts and some term deposits (savings bonds) with varying maturities to quickly get a bit of regular income, but not enough to keep the income steady after allowing for inflation.

Do you have a mortgage that might allow overpayments or offsets, so reducing the mortgage capital might cut spending and effectively increase income? If yes, what rate?