Think back to the 80’s (if you can!) we had Wall Street, Harry Enfield’s Loadsamoney, Miami Vice, regular news items on city traders making a fortune. At that time being a millionaire was out of reach for most people. Maybe a bit distasteful even.
Since then, due to the success of the UK housing market, many people have found themselves property millionaires. Although you can’t “spend” a property. Being a millionaire has become more common, particularly if you live in the South East. Aspirational even.
But what about investments that you can “spend” – your pension for instance? Not too long ago you could throw as much as you liked at your pension and get some lovely tax relief along the way. Since around 2010 there have been restrictions placed on how much you can have in a pension – currently it’s £1.07m.
A million pounds?! That’s ‘a huge amount of money to have in your pension! Or is it?
If you think that the average salary in the UK in 2020 is £38,600 if you are 40 with another 25 years to work, with just some inflationary increases your salary would be £63,327 by the time you retired. In “real” terms though your income would be the same as in 2020.
If you wanted to maintain that income in retirement, you’d need to have at least £1m in your pension, yes, you’d need to be a pension millionaire.
Is this achievable or does it feel so hard that it’s not even worth thinking about? With some practical steps you will increase your chances of hitting your target. Here are six to get you started:
- Budget – work out how much spare cash you have
- Commit to an affordable monthly amount – set up a regular payment
- Review every time you get a pay rise
- Choose a well-diversified low-cost equity portfolio for the bulk of your savings – if you have more than 10 years to go, risk is your friend
- Review regularly
- Sit back and watch the magic of compound returns doing it’s job
Talk to us about becoming a pension millionaire.