Can you live off your investments/savings?!

prezzacc

Hi all.

Just wondered would it be possible to live off interest / divedens / income from money you have invested / in savings? I've just worked out what I'm getting each month on my savings, a piddly amount, but it got me thinking those who are financially well off could quite likely live off thier investments and savings surely?

chockydavid1983

Yes, if you had enough savings/ investments that, given their average return, would cover your expenses. Search "Financial Independence".

Rheumatoid

Depends on the time you need to do it for. I would struggle to live comfortably off the income alone but if I start to draw down the capital as well I could live quite well for at least 30 years. I am 57 so that would probably see me out :-)

bertpalmer

Not yet - but that's the aim...

ColdIron

Of course you can but you need to plan for it. Pennies in, pennies out

prezzacc

Thanks all. Very Interesting! I'm starting to take more of an interest in finances and see how this could work. Financial independence with a quick Google made for some interesting reading thank you, more research. Now to get multiple streams of income ideally passive! Best hop over to the boost your income board

Uxb1

prezzacc wrote: »

Hi all.
but it got me thinking those who are financially well off could quite likely live off thier investments and savings surely?

This is exactly what those of us early retired do.
We are not yet entitled to our state or company pension so we live of the income stream from our savings and investments accumulated over many years.

When you are not working/semi-retired you actually spend more than when you are working as you are now out and about visiting places all the time while at at same time home more in the winter with the heating on.

Of course as one gets older the amount you can spend starts to get complicated.
You have capital and you and an income stream from it - but you don't know how long you will live and you don't know how inflation will rob you of the purchasing power that income give you. Nor you know whether a stock market crash will deplete you capital and neither if will you need expensive long term care at the end of your life....let alone what the government will be or do in 20 years time: a future HMG could even means test the state pension so those with existing pensions get nowt.
Older people spend more more on services which are going up in price while younger people spend more on "stuff" which is getting cheaper in general so inflation rates for older people are higher than those for younger people.

Now you probably do not want, as the saying goes, to be the richest person in the graveyard and die with a few £m in the bank: which means as you get older and into retirement age plus you can afford to spend both all the income received and also capital. How much of a % of your wealth you can afford to spend each year is the most discussed figure amongst retired people on the web. In the old days of high interest rates and investment returns it used to be 4% which actually was a USA not UK figure - I reckon today its much lower like 2%.

LHW99

I believe it used to be called "of private means"

Zola.

The thing that concerns me is inflation.

e.g. if you need £25k per year in 2019 to live on (after you've paid the mortgage), the common wisdom is to have 25 times that and you can retire - £625,000.......but that is todays money... it may take 30 years to get to that in investments... come that time £625,000 wont be worth anywhere near worth as much as in 2019, so the goal posts move again.. does that make sense or am i missing something?

NoMore

The hope is the growth on the investments beats inflation

Zola.

With a 20k base, saving £1000 a month with 5% growth would take 24 years to get that figure. Scary haha