Can you live off your investments/savings?!

dividendhero

Prism wrote: »

Ideally I would like to retire in about 10 years time with about £1m to £1.2m. My wife a few years later with a small government pension and about £0.8m

We shall see if thats possible closer to the time

£2 million and a Govt pension...think you'll have to top up by selling Big Issue

Dazed_and_confused

And if you can get into the position where you are living off savings it is currently very tax efficient even if the income is outside an ISA.

If you have the correct mix of income you could have £20.5k annual income and pay no tax.

£22.5k each if you are a married couple.

colsten

prezzacc wrote: »

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?

Put your question in a different way: what would you live off, eventually, if not the money you have saved / invested, making use of all available help (employer contribution, tax relief)? An inheritance? Your partner? Benefits? The old age fairy doesn't exist but old age does, for the vast majority of us.

reeac

It used to be said that the really wealthy lived off the interest earned by the interest on their savings.Sort of double insulation against depreciation of capital.

Prism

dividendhero wrote: »

£2 million and a Govt pension...think you'll have to top up by selling Big Issue

Shrug. A million will likely get a 35k income. In ten years time that won't be worth as much

triplea35

Dazed_and_confused wrote: »

And if you can get into the position where you are living off savings it is currently very tax efficient even if the income is outside an ISA.

If you have the correct mix of income you could have £20.5k annual income and pay no tax.

£22.5k each if you are a married couple.

I think I understand how the £20.5k is made up. The total of £12.5 personal allowance, 0% starting rate for interest £5k, personal savings allowance £1k, and dividend allowance of £2k totals £20.5k

Where does the additional £2k per individual come from for a married couple?

Also could you not utilise the £12k Capital Gains Allowance? presuming the OP had some of his wealth invested.

Dazed_and_confused

It would only be relevant if each spouse applied for Marriage Allowance (they would each have a Personal Allowance of £11,250) and also had dividends of £5,250.

After PA, savings starter rate, savings nil rate and dividend nil rate that leaves £3,250 dividend income to actually pay tax on. £3,250 x 7.5% = £243.75.

As their spouse had also applied for Marriage Allowance they are then entitled to a £250 deduction in their tax bill so nothing to actually pay.

ruperts

prezzacc wrote: »

Being in 30s I know I'm too late for it really to be anything to amass too!

Would anyone like to guesstimate what sort of value say in a passive index investment you would be happy to retire on? Or would it really be nearly 900k!

Don't let the big sums being quoted put you off. Consider that many people live quite happily on below average salaries. If someone is earning say £25k then how much does it cost to fund their lifestyle? Probably not much more than £10k plus mortgage costs. Using a 4% withdrawal rate you'd need £250k plus being mortgage free to fund that lifestyle, which is a perfectly viable target for anyone starting in their 30's.

Zola.

ruperts wrote: »

Don't let the big sums being quoted put you off. Consider that many people live quite happily on below average salaries. If someone is earning say £25k then how much does it cost to fund their lifestyle? Probably not much more than £10k plus mortgage costs. Using a 4% withdrawal rate you'd need £250k plus being mortgage free to fund that lifestyle, which is a perfectly viable target for anyone starting in their 30's.

:beer: Nice words of encouragement Ruperts.

short_butt_sweet

Dazed_and_confused wrote: »

It would only be relevant if each spouse applied for Marriage Allowance (they would each have a Personal Allowance of £11,250) and also had dividends of £5,250.

After PA, savings starter rate, savings nil rate and dividend nil rate that leaves £3,250 dividend income to actually pay tax on. £3,250 x 7.5% = £243.75.

As their spouse had also applied for Marriage Allowance they are then entitled to a £250 deduction in their tax bill so nothing to actually pay.

wow, i didn't know this trick. i'm off to get married now