Taxpayer 'Bonus'. £520,000 we don't need to find.

wotsthat

ash28 wrote: »

I think it could be saved from wages easily....compounding is the key.

I think Graham now agrees this is possible.

His objection seems to be that whilst it may be possible to accumulate a fund of £500k it's not possible, in the example, to contribute £500k from earnings to savings the evidence being that lifetime earnings were less than £500k so how can you contribute more than that?

There might have been a misunderstanding and Graham genuinely thought I meant it was possible to contribute £500k to savings rather than accumulate £500k of savings. I suspect forumonics personally.

Loughton_Monkey

ash28 wrote: »

I think it could be saved from wages easily....compounding is the key.

..........

I know an average of 8% interest seems high at the moment but over the course of a lifetime rates will vary, they have over mine, massively. The Nottingham Building Society has an ISA that pays 4% for a year..or with a bit of a risk you could invest in peer to peer lending that returns about 6%.
.........

Very true.

When talking about a period of 40 years, or more (i.e. retirement wealth) it is patently obvious that we will go through almost every combination of good/bad financial climates.

There is, I believe, a strong tendency [amongst those who don't fully understand] to use short term conditions to influence their lifetime strategy. Big mistake!

Example: I started working in the 70's. Inflation was so bad, something costing £100 on 1/1/70 would cost £347 on 1/1/80. That's an average of over 13% a year for 10 years. Whingers would say "best to spend all your money. No way you can get 13% on investment....". But they don't understand the power of compounding or the tenet 'early savings are the best savings'... They don't realise that when the good times do come - say 10% investment returns - then in their own case, 10% of f* all is f* all.

Example: You don't have to look far for those who claim that buying a house is a bad investment. They crash. They are overpriced. It cannot last... Better to rent... And yet property over 40 years will always give an excellent return, whenever you bought it.

I have the data to track my own returns over 40 years with a reasonable degree of accuracy. My reckoning is that I have achieved an average of 7.38% compounded, against an RPI of 5.90% pa over the same period.

House purchase has delivered about 6.9%, but rather unpredictably, the best return came from all my old Endowment policies. From 1973 to 2008 (when the last one matured) they delivered a staggering 12.2% compound. And they were "safe" investments in those days given reversionary bonuses. I never used them to pay off my mortgage - leaving it to inflate away. But, OK, the earlier ones got premium tax relief.

Rather irritatingly, I have got slightly below average returns from money purchase pensions, and PEP/ISA [Stocks & Shares]. But still higher than RPI.