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
- Charlie and Chloe are 45 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 20 years and have saved
(made contributions) totalling £194K (at 4% real growth pa)
or £302K (2% real growth) so far - These have grown to £280K (@ 4%) or £361K (@2%)
- Of this, £54.4K has been used as the deposit on a house
What they need to do from here
- Over the next 20 years, they need to save a total of between £195K (at 4% real growth pa) and £304K (2% real growth)
- Annual contributions will average 10K (@4%) or 15K (@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 98 deals (@4%)
or 102 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 £394K at an average of 20K per year
- Contributions will vary between 16.0K and 22.8K
- They will make another 197 deals of £2K,
averaging 10 deals per year - At 2% growth, they will need to save another £521K at an average of 26K per year
- Contributions will vary between 21.1K and 30.1K
- They will make another 173 deals of £3K,
averaging 9 deals per year
Catching up – saved nothing yet
- If they have saved nothing, then @4% they will need to save another £595K at an average of 30K per year
- Contributions will vary between 24.1K and 34.4K
- They will make 198 deals of £3K, averaging 10 deals per year
- At 2% growth, they will need to save another £739K at an average of 37K per year
- Contributions will vary between 29.9K and 42.7K
- They will make 184 deals of £4K,
averaging 9 deals per year
More to come later on what they need to invest in.
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