If (only) I had 1,000,000 to last 40 years would this work?

[FluffyFluffy]

Interested in how people would plan to make £1m last 40 years!
Would these work?

Scenario 1: assume inflation of 2.5% and. Growth of 5% .... allows for £39,000 withdrawal annually

Scenario 2: ignore growth and inflation and assume it is safe to withdraw £25,000 (4%) for 40 years

Other ? !!!

Is this assuming you have no rent or mortgage? I couldn’t live on 25K a year. I could Possibly do 39K… but I doubt it to be honest. That really.wouldn’t be living to me it would be barely living.

That amount of money would get higher than normal interest rates over a sustained period, I dream of this and have calculated that I would be able to retire, even though people think you cant retire on a million, you can quite easily by your method

My income now is much higher than 40k but I could cut down easily and live on that

Then you have other options, perhaps invest half in the lower risk stock market options, over 20-40 years that would be much higher than 5% I believe

4% rule I think! Early retirement? Congrats if so!

Without dependents, as a single person? I'm sorry but that's borderline offensive to the many people who are living on those amounts, and who are truly living, not merely existing. Many people live on far less.

Without dependents as a single person…possibly but with rent or mortgage it wouldn’t be much would it. And I know ppl live on that and less but I was talking from a personal viewpoint. Let’s face it @TreesWelliesKnees i think most people on 25k would tell you they need a good bit more these days. I wasn’t trying to be offensive, it’s the truth 25k is not a lot to live off.

4% is £40k
id invest in shares and aim for a 5% dividend yield so that the £1m remains and will generally grow along with dividend payouts
5% is £50k

The key part is what you are doing about house ownership / renting / mortgage.
Which leads to where in the country you want to live.
You could buy a really nice house, outright in many parts of the country for £250K, leaving you £750K to invest.

Of course, if you aren't working, what are you doing about pension contributions?

But if you are young, and single, and no dc, then wouldn't you do some work - if only part time?

In truth, if I had a million with 40 years of life still ahead of me, I'd secure my housing, carry on working, and know I could afford luxuries that wouldn't have been able to come out of salary alone.
Make choices to work part time, or retire early, or even take gap years and travel whilst I was relatively young. I wouldn't aim to sit around doing nothing for 40 years, watching my budget, when I could make better choices.

Yep, look up FIRE.

Are those figures allowing for tax?

Thanks for the replies

I was thinking more hypothetically if for some reason I couldn't work/earn... if in that scenario how much could I withdraw per year if I had to make it last 40 years.

As to what it would need to cover is a different question really... but for this discussion id cut my cloth accordingly to the measure!

I've read FIRE, I've tried calculators but though I'd ask some friendly people here for a human pov

@TeamPlaying yes it would need to cover tax, but I'm less worried about what it needs to cover..

Look up an annuity calculator. That will tell you how much income an insurance company would give you in return for £1m.

@Focalpoint thanks, however I'd plan on self managing (like a draw down) but my challenge was s the calculators I try all give different answers!

Too many variables. Size of household, housing costs, lifestyle expectations, current age. Plus assumptions about what the economy will do over the next few decades.

But if you're a 40/50 something wondering if you can retire, you should probably pay for advice on that amount.

Also think about the 'die with nothing' concept. You can use the £1M to provide you with a very decent basic income (just taking the interest/investment growth is likely to net around £25/30k minimum after tax) without touching the capital but that would mean you'll still have the £1M after 40 years but unless you also want to leave an inheritance you can also include some or all of the capital in your calculations.

You'd also need to consider the impact on your state pension if you haven't already got the full contributions as that would pay you the future equivalent of £11k pa which will be a good hedge against inflation in future decades when £1M and the income it provides isn't as big a sum as it is now.

But I think there might be ways of voluntarily buying missing years or paying contributions including running a very small scale business, eg a bit of ebay trading.

No way would I be handing over a million like that, the amount you get in the end is paltry and you lose your lump sum

Well, I earn £33,000 now and pay all my bills comfortably.
Once retired with mortgage paid off and no commuting cost I could easily live on £25,000.
However, if that was a fixed income I would be worried about inflation.

I think I was aiming for 600,000 in the bank to be able to retire, using the 4% rule. I'll be over 90 at this rate, but still 😂

DH and I are both retired (early). In 4 years we’ve spent £120,000 which includes £10,000 car and £20,000 updating house. We have 2 UK holidays each year and have small private pensions, although DH receives state pension now. With better interest rates, we now have quite a good amount to live off each month, and some months we don’t now have to dip into savings. We live comfortably, eat well, but not too extravagant on spending.

It’s not a 25k salary, it’s 25k net - equivalent to a 30k salary. That’s worst case scenario and I think manageable. Option 1 is 39k net too so about a 50k salary.

I haven’t at all had the same hypothetical question while bored at work. I definitely didn’t do a spread sheet taking into account variable interest rates and compound interest. I’m a dreamer haha.

I think if I wasnt at work all day to keep me busy I would be spending even more than I do now. I spend an awful lot, I enjoy it, but would have to do volunteering or something to keep me busy anyway and connected to people but also reduce opportunities for shopping

I think for me the biggest problem would be knowing I had a million. That would make it really hard for me to resist the many low cost fripperies that would soon add up. I’d be back at work in 3 years