It’s a goal many of us will have when we lump £2 on the lottery this week: becoming a millionaire and retiring to live out your years in comfort and luxury.
But becoming a millionaire pensioner is not as impossible as it might seem, according to Barclays bank and financial experts who have done the maths and shown how much you need to save to be quids-in when you retire – and it’s not too late to make it even if you’re close to pension age.
Using an ISA and investing in stocks and shares regularly could see your money grow exponentially over the course of your working life.
Investment platform Hargreaves Lansdown has reported a 14% surge in ‘ISA millionaires’, people who became millionaires just from investing into an ISA.
ISAs, of course, are protected from tax and many stocks and shares ISAs, such as those offered by Hargreaves Lansdown and Vanguard, allow you to make regular investments into specific companies or national or global tracker funds, which track a group of companies or the performance of an entire market.
Barclays says: “The highly coveted status of being an ISA millionaire belongs to just a few thousand people in the UK. They had time and money on their side to get there, but they also followed key investing habits that can help you too.”
They added: “To get to £1 million, the first step is to invest the maximum each year. The most you can invest in an ISA in any given tax year is £20,000. So, if you started investing your full ISA allowance today and the ISA limit remained at £20,000, it would take you 25 years to become an ISA millionaire, assuming an average annual return of 5%. A lot of people won’t have this amount of money or time, but investing what you can into your ISA is a good habit to have.”
Of course, maxing out your ISA allowance requires a saving of £1,666.67 per month for 25 years, which is unlikely for many of us.
But you don’t necessarily need such a high amount if you invest early and manage just average growth.
Sarah Coles, head of Personal Finance at investment platform Hargreaves Lansdown, said: “If you were to pay in £300 a month from the age of 25, with 5% growth, you’d be a millionaire by the age of 70..
With the same maths, you could be a millionaire by 70 if you started at age 20 and saved just £184 into an ISA.
Hargreaves Lansdown said the average age of ISA millionaires on its platform is 72 – meaning a very happy retirement for those who started investing early.
