Millionaire by 65

Chloeturner

The telegraph released this article and I was wondering how true and reliable/accurate This actually is and if it is actually something worth trying to do.
This was the arcticle:
Everyone dreams of being a millionaire but few believe it is an achievable goal. Yet by saving from a young age that dream could become a reality by the time retirement comes around.

Saving for a house deposit, buying a car and paying off student debt often take priority for young people, but the value of early saving for those later years should also be considered Research published by AJ Bell, a fund shop, shows that a 22-year-old would need to invest £78 a month to amass £1m by the age of 65.

For older investors, the monthly sums are higher. A 30-year-old would need to save £174 a month to achieve millionaire status in retirement while someone starting out at the age of 37 would have to put aside £377.

This analysis assumes a net return of 10pc per annum, after fees are considered, and that contributions increase in line with inflation.

Investors should use the Lifetime Isa (Lisa) as their primary way to invest, as it offers a Government bonus of 25pc each year. Once the yearly £4,000 Lisa allowance has been maxed out, investors should use the tax efficient stocks and shares Isa, the firm said.
Laura Suter, of AJ Bell, said that by saving for retirement from a young age, investors would be able to benefit from compound growth over many years.

“This is when your savings grow each year and then in future years you get growth on that growth,” she said. “As the example shows, the later you leave it the amount you need to start saving quickly ratchets up.”

Investing is riskier than cash savings, but the potential returns are much higher. Ms Suter said a cash saver would need to save until they reach 100 to become an Isa millionaire, assuming an interest rate of 1.5pc a year.

“Investing in the stock market does involve taking risk but over the long term shares have delivered very strong investment returns compared to other types of investment,” she added.


“One of the most valuable things millennials have on their side is time. This enables them to take a very long-term view and know that they can sit tight when things get a bit bumpy and ride out any short-term market volatility."

Chloeturner

Also what does this mean in simpler terms

fun4everyone

Chloeturner wrote: »

The telegraph released this article and I was wondering how true and reliable/accurate This actually is and if it is actually something worth trying to do.

There are several stretches in the article. 10pc after fees over the long term is just about doable MAYBE but requires higher risk funds than most people can stomach. The lifetime ISA might not be around for long etc etc.

The overall point though is that the earlier you start investing the richer you will be when you are old. It is the truth and should be taught in schools.

Thrugelmir

A million isn't what it used to be.

bostonerimus

If the 22 year old puts 125 GBP a month away for 43 years (ie up to age 65) and gets 10% return every year they will have a million. 10% is certainly optimistic, but the saving and investing part from an early age should be done by everyone who can afford to do it...and you should be saving before you spend on SkyTV and Starbucks. Also the 125 GBP/month includes the employer's contribution to a pension so it's actually less coming out of your pocket.

I started investing when I got my first real job at age 25. I'm now in my late 50's and my average annual investment return has been 8.6%....so not far off 10%...and I didn't do anything very esoteric to get that return. So if you have an average salary, below average spending, 40 years ahead of you and some common sense there's a good probability that you'll end up with around a million.

dividendhero

Chloeturner wrote: »

The telegraph released this article...

The Daily Torygraph is a comic these days, I would rather take financial advice from the pages of Viz

Mr.Saver

Assuming inflation rate of 3%, a million in 40 years would only worth a little bit over 300k in today's pounds.

So by the time a 22 years old reaches 65, the million is really just 300k, and she/he would need to live on average another 30 years on the 300k (and the investment returns from it). I'm not impressed.

fun4everyone

Mr.Saver wrote: »

Assuming inflation rate of 3%, a million in 40 years would only worth a little bit over 300k in today's pounds.

I reckon about £300,000 invested is about the minimum you need to be at the point you can live off it and keep the capital rising in line with inflation. That's if you invest it properly and are happy with a frugal lifestyle. Yes of course the amount you need can be argued about endlessly depending on personal circumstance.

kinger101

dividendhero wrote: »

The Daily Torygraph is a comic these days, I would rather take financial advice from the pages of Viz

It could be worse. It could be Motley Fool.

bostonerimus

Mr.Saver wrote: »

Assuming inflation rate of 3%, a million in 40 years would only worth a little bit over 300k in today's pounds.

So by the time a 22 years old reaches 65, the million is really just 300k, and she/he would need to live on average another 30 years on the 300k (and the investment returns from it). I'm not impressed.

Good point, the average person with 30 or 40 years to retirement should be aiming to have a million in the pot when they retire. In fact I think they should be aiming to save significantly more as 125 GBP a month is not much to be saving.It would be good if people saved at least 20% of gross salary, So someone in an 25k/year should be saving 420 GBP/month.

EdGasketTheSecond

"This analysis assumes a net return of 10pc per annum, after fees are considered,"


That is over-optimistic by a long way. To achieve that over 40 years nigh on impossible imho unless inflation is back up in double-digits to match which kind of negates the value of £1m anyway after 40 years.