Cash ISA: half a million in 30 years?

Aegis

If nothing else, the fact that tax free savings don't count towards some of your stateb benefits is quite nice.

However, I agree that 30 years is too long to spend building up cash ISAs. I'd personally be happy with £15-20k (modern equivalent) in high-interest tax-free accounts in case of sudden expenditures, and would then prefer to have a similar amount at least in a stocks and shares ISA.

nobblyned

I've worked out that if I stuff a 20p piece up my nose every 5 minutes for the next 30 years then I'll end up with over half a million quid up there.

Why doesn't everyone do it?

Lokolo

If I could I would.

My nose isn't big enough

manic_saver

O.k its great to have all that money. I think cash isas are good short term, and if you want a decent income i would go for the s&s isa.

I personally would have 50% in s&s 25% in a cash isa and the rest in to a pension.

dizzie

beingjdc wrote: »

Yeah, that's the thing. I've done my maths and based on my current savings rate, I would have just over a million pounds in savings and investments when I retire. However that will probably buy me a fry-up to celebrate, by that time!

Factoring in for inflation (or for more steeply rising things like council tax (which I understand they don't count when calculating CPI/RPI))...I wouldn't count on that celebration fry-up!

thor

manic_saver wrote: »

O.k its great to have all that money. I think cash isas are good short term, and if you want a decent income i would go for the s&s isa.

There is nothing to say that stocks and shares will do better than cash. As far as I am concerned past history(even long term) is no indication for the future. The stock market now is less than it was nearly a decade ago and there is no reason to assume that it won't keep going down over the next 30, 50 or 100 years.

Aegis

If the stock market kept going down for that many years, you'd be unlikely to be safe with cash. You'd see pretty much every company going bust, and the government would almost certainly have to be stepping in to take direct ownership of most of the important companies at the expense of savers and taxpayers in general.

In short, if the stock market heads downwards for 30 years, you have a lot more to worry about then whether your money is safe or not.

Worse yet, if ALL stock markets head down for 30 years, we're all pretty screwed, in the markets or not!

gandalf

OK, pardon my persistent questioning but I have to get to the bottom of this.

If earning 5% a year on average (tax free) is not anywhere near enough, what sort of return would your funds need to generate year on year to grow and offset all effects of inflation? I don't believe I have seen any illustrations of the compounded effect of inflation in my pension projection.

What's should be my expectation of a realistic ROE year on year on their retirement fund? I know the higher the better, so mind the word 'realistic'.

dunstonh

Yes, but don't forget that with inflation the wages will go up as will the maximum allowance, so the effect will still be the same.

In the last ten years there has only been one increase to the cash ISA allowance. It was a below inflation increase.

There is nothing to say that stocks and shares will do better than cash. As far as I am concerned past history(even long term) is no indication for the future. The stock market now is less than it was nearly a decade ago and there is no reason to assume that it won't keep going down over the next 30, 50 or 100 years.

You are treating "the stockmarket" as it it means one thing. The FTSE100 maybe lower than it was a decade ago but many people (who are not in trackers) have [more than] doubled their money in that period because of dividends, diversification and rebalancing.


Cash historically just about keeps up and gives a slight improvement over Govt inflation figures. Of course, everyone has a personal inflation figure and cash maybe nowhere near yours.

If earning 5% a year on average (tax free) is not anywhere near enough, what sort of return would your funds need to generate year on year to grow and offset all effects of inflation? I don't believe I have seen any illustrations of the compounded effect of inflation in my pension projection.

Companies have the choice to project on monetary growth basis (5, 7 & 9%) with no inflation deduction or SMPI basis (7% minus 2.5% for inflation). Companies can lose lower growth rates than those but not higher.

SMPI is the sensible one but unfortunatly Average Joe Public is turned off by SMPI illustrations as it makes it look like the money they are paying is going to be no better in 30 years time as they dont understand inflation. Of course, anyone that thinks that paying £100pm for 30 years is going to pay them more than £150-200pm in todays terms for 30 years in retirement is deluding themselves. Problem is that there are a lot of deluded people out there.

As a rough guide, its probably worth looking at the RPI figures for inflation and you net returns need to beat that to get any real growth. RPI was 4.1% in Feb but you would be safer using 4.5%. Indeed, if the world shortages continue then you may be safer using 5% or more as shortages are behind many of the price increases.

gandalf

Right, that's it. I am going to buy as many BTL properties as I can (I have one) with the plan to pay off all the mortgages by the time I retire. The rents will be my pension. Rents will more or less keep up with the cost of living, which is great.

If I invest in property sensibly at popular locations, I can't go wrong. I don't care if they fall in value in the medium term (I'll buy more if they are cheap), I not going to ever sell them anyway.

I still have 30 years to retire.