This is one of a set of fourteen pages which describe the hypothetical 7C investors – long-term UK DIY private investors on their way to financial independence and retirement.
Contents
What they want
- Ben and Bella are 35 years old, and they want to
retire at age 65, with an annual income of £25K pa (each) - Using the 4% rule, they need to amass a pension pot of £625K
(in today’s money) - They also need to buy a house, at the UK average price of £272K
- They will need a cash deposit of 20% for the house,
which is £54.4K - They also need an emergency fund to cover 6 months of their target income, which is £12.5K
- The total pot of money they need is 625 + 272 + 12.5 = £909.5K
Where they are now
- They have been investing for 10 years and have saved
(made contributions) totalling £85K (at 4% real growth pa)
or £133K (2% real growth) so far - These have grown to £101K (@ 4%) or £145K (@2%)
- Of this, £54.4K has been used as the deposit on a house
What they need to do from here
- Over the next 30 years, they need to save a total of between £304K (at 4% real growth pa) and £473K (2% real growth)
- Annual contributions will average 10K (@4%) or 16K (@2%)
- Contributions will vary between 11.3K and 7.9K (@4%)
or between 17.6K and 12.3K (@2%)
The deals
- Their deal size is either £2K (@4%) or £3K (@2%)
- They will average 5 deals per year (@4% and @2%)
- They need to make another 152 deals (@4%)
or 158 deals (@2%) in their investing career
Catching up – saved half of the plan
- If they have saved less than planned (say half), then @4% they will need to save another £387K at an average of 13K per year
- Contributions will vary between 10.1K and 14.4K
- They will make another 193 deals of £2K,
averaging 6 deals per year - At 2% growth, they will need to save another £567K at an average of 19K per year
- Contributions will vary between 14.8K and 21.1K
- They will make another 189 deals of £3K,
averaging 6 deals per year
Catching up – saved nothing yet
- If they have saved nothing, then @4% they will need to save another £474K at an average of 16K per year
- Contributions will vary between 12.3K and 17.6K
- They will make 157 deals of £3K, averaging 5 deals per year
- At 2% growth, they will need to save another £662K at an average of 22K per year
- Contributions will vary between 17.2K and 24.6K
- They will make 165 deals of £4K,
averaging 6 deals per year
More to come later on what they need to invest in.
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