Is it conservative to assume a 5% annual return on a S&S LISA - Vanguard 100

dunstonh

In the decade from 2000 to 2009, global trackers made nothing.  10 years and your value was lower than you started.



So, use projections wisely and under-project what you think it will be.      I tend to use the 30th percentile in terms of the projection of an asset class (i.e. 100th is best.  0 is worst).  It is a pessimistic approach but better to be that than optimistic and fail to achieve the objective.

edit:  this is total return with dividends reinvested

Albermarle

IAMIAM said:

Well if I put away £5k per annum for the next 11 years, currently have a balance of £10000, using 7.5%.

LISA value after all deposits to age 50 = Hopefully £112k
LISA value with no deposits from 50-60 = £236k Maybe, could be a lot more or less.

Which is great as I want to cash this in and use to pay off mortgage and quit work at age 60 at the absolute latest. 

With investing there are no certainties, so I have amended your post in bold.
Best to have a Plan B as well.

Nebulous2

Why would you stop adding money at 50? 

eskbanker

Nebulous2 said:

Why would you stop adding money at 50? 

No choice to go beyond that within a LISA, but possible in other accounts obviously....

https://www.gov.uk/lifetime-isa

You can put in up to £4,000 each year, until you’re 50. 

[...]

When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns. 

Nebulous2

eskbanker said:

Nebulous2 said:

Why would you stop adding money at 50? 

No choice to go beyond that within a LISA, but possible in other accounts obviously....

Thanks - I'm far too old for a LISA, so have never paid any attention to them. 

For many people who want to retire early their 50s is a productive decade, peak earning power, reduced other commitments from mortgages and children. A key time to squirrel money away. 

masonic

Nebulous2 said:

eskbanker said:

Nebulous2 said:

Why would you stop adding money at 50? 

No choice to go beyond that within a LISA, but possible in other accounts obviously....

Thanks - I'm far too old for a LISA, so have never paid any attention to them. 

For many people who want to retire early their 50s is a productive decade, peak earning power, reduced other commitments from mortgages and children. A key time to squirrel money away. 

Another feature of LISAs is that they cannot be accessed until 60 (without penalty), so they would not support someone retiring early in their 50s.

Albermarle

Nebulous2 said:

eskbanker said:

Nebulous2 said:

Why would you stop adding money at 50? 

No choice to go beyond that within a LISA, but possible in other accounts obviously....

Thanks - I'm far too old for a LISA, so have never paid any attention to them. 

For many people who want to retire early their 50s is a productive decade, peak earning power, reduced other commitments from mortgages and children. A key time to squirrel money away. 

I would agree that for most people, their 50's would be a peak time for squirrelling. I am often surprised by the number of posters looking to retire at 55, and seeing that as normal. As I understand it is still not that common and the average retirement age is around 62. Of course as we often say the forum is not representative of the general public.

Dh6

I would say it depends on your vocation. I’ve seen many in the construction trade buckled in their 50’s.

JohnWinder

In the decade from 2000 to 2009, global trackers made nothing.  10 years and your value was lower than you started.

Useful chart, but the Y axis is ambiguous. Is it the changing price of a unit in the fund, and you actually did make something in terms of distributions (not the end of the world); or is it the changing value of an investment with distributions reinvested (closer to the end of the world)?

masonic

JohnWinder said:

In the decade from 2000 to 2009, global trackers made nothing.  10 years and your value was lower than you started.

Useful chart, but the Y axis is ambiguous. Is it the changing price of a unit in the fund, and you actually did make something in terms of distributions (not the end of the world); or is it the changing value of an investment with distributions reinvested (closer to the end of the world)?

FTSE World index, without reinvestment of dividends (looks like dunstonh's chart):

Now with reinvestment of dividends:

This would still be a loss in real terms, as UK CPI went up about 22% over this period.