Living off interest

deemy2004

Also ! Don't forget that inflation devalues the stoozed debt...;)

Walletwatch

deemy2004 wrote:

Also ! Don't forget that inflation devalues the stoozed debt...;)

True - one of the few cases where inflation and time value of money work to the saver's advantage ;-)

spl0dge_2

living off interest is the biggest myth on the planet.
Even if you get top rates you will never stop your money from devaluing.

goverment says inflation is 2% when in reality it is 5% (they can include/disclude whatever they like, e.g when property rises at 30% every year they remove it, when property falls they then decide to include it). when jog bloggs gets a 3% pay rise he thinks he's doing very well, but in reality he's getting a 2% pay cut because gov has printed 5% of new money without his knowing. he is so happy he works even harder.
inflation is directly proportional to the amount new money the government prints.

see here to undertstand it.
http://www.abelard.org/inflation.htm


do you honestly think banks are going to give you free money (given savings rate - inflation rate) for doing nothing?
unlikely isn't it.

deemy2004

if the above was true then we would be no richer than we were 10 years ago... but we are richer as we have had REAL GDP growth of some 36%

EdInvestor

Inflation is a serious problem over time, even at today's comparatively low levels.If you hold all your assets in cash, after 20 years the value of the capital will be halved.This is the problem with non-index linked pension annuities, the ones most people buy - after 20 years, the spending power of their income is half what it was when they retired.

To beat inflation and maintain value you need to invest your capital in assets that appreciate over the long term, such as property and shares. Most people also need to invest a chunk in cash or perhaps gilts so as to reduce the volatility that goes along with appreciating assets.

deemy2004

yeh the safest no brainer for your pension pot is index linked government bonds where both the capital and the interest are linked to RPI.

ttoli

Hello
On this note I'll be living in Northern Cyprus ( Turkish so non EU) in a months time. I'll need £5k a year to live on and have £150k to invest/save, Where is the safest place offering the highest return? Can someone explain what Index linked Government bonds are, and are they available to non UK residents which I will be..

Thanks

ttoli

joesan

Wonder how much money i would need to retire at 40!!
im 28 at the moment I have about 275k 150 of it is invested in my own property. so have about 125 in various investmenets. Do you think if i had 500k by 40 will it be enough to retire on?

ttoli

Charles,
I'm quite new to screwing the banks before they screw you concept,but figure that even with a 5% return, I should cover my living expenses(yeah it's v cheap there!).
I'm more concerned that my initial invesment doesn't twindle in value.

ttoli

deemy2004

ttoli wrote:

Hello
On this note I'll be living in Northern Cyprus ( Turkish so non EU) in a months time. I'll need £5k a year to live on and have £150k to invest/save, Where is the safest place offering the highest return? Can someone explain what Index linked Government bonds are, and are they available to non UK residents which I will be..

Thanks

ttoli

As a non UK / EU tax payer you should get your interest gross on savings accounts. The index linked government bonds can be bought from most stock brokers same as you buy and sell shares.

The price of the bonds fluctuates but with an upward trend as the value of the bond is indexed each year to be paid on maturity (obviously you can sell the bond before maturity).

The fluctuation depends on inflation or rather peoples perception of future inflation. If inflation is low and future inflation expectations are also low then the bond will be priced more cheaply so if you time it right you can pick up a bargain !.. Now if inflaiton is high i.e. as in the early 90's and future inflation expectations are also high then the bond already has that priced in. But still you would not have a capital loss as long as you let the indexation accrue for a number of years.

At the moment the bonds are fairly priced Thats not cheap and not expensive - fair as future inflation is in an uptrend but with the BOE doing a good job it is not expected to go much above the 2% level.

As far as I am concerned this is the largest single holding in my portfolio as it is also the safest investment I have, as its basically a case of buy and forget requiring very little monitoring as agaisnt individual stocks or savings accounts.