Something different for a post today, as I get older in life, I start looking towards my future. I’ve reached the point now where something I should have prioritised when I was younger is now on my mind. As such I’m planning for my retirement and will be looking at investing so that I can plan ahead for my future and my retirement. The end goal for this is to have a retirement portfolio valued over £1,000,000 and then live off it following the 4% rule
I’m currently 41 years old, and my current retirement age is 67 years old. So I have 26 years before I reach the office age that I can retire and no longer have to work. I decided earlier this year, that next year on my birthday. I was going to have a 25 year plan, mainly focussing on investing. I wanted to keep a track of this, to learn as I go. Knowledge itself is invaluable, so there’s no price on this. I can always track it, and learn from mistakes when I’m young. If I could go back now to when I was 18 years old, I’d be investing a lot. I’d also buy a lot of bitcoin, but can’t win them all.
My primary focus for the reason of my 25 year plan is that when this finishes, officially I will be state pension age. Although this will inevitably change, it will give me a plan to work on. I’ll be buying diaries for each year, so that I record everything, make notes and go back on them.
I am primarily investing into stocks and shares as a source of income. Mainly because I want to use the power of compound interest to boost my earnings. I frequenly go through forums on reddit related to Finances. I’ve followed their calculators and I have the benefit of being debt free, so any additional money I earn can be pumped straight into savings.
Currently I’m putting away £450 per month into investments, but next year I’m looking at increasing this to £750-£1000 per month to give a serious boost into my savings.
In an emergency, the money I’m investing also acts as a source of emergency income. As I can withdraw all the sources I use within a short period, but primarily they’re all for long term. The money I put away is primarily split between two sources.
- Premium Bonds
- Trading 212
The reason I have chosen these sources is mostly for stability. Premium Bonds in the UK are Government backed so that any money you put into them will be returned back in the eventuality of any form of collapse (for now anyway, the current UK climate is rubbish financially). The main reason I invest into premium bonds are because you get a free “lottery” ticket with every bit of money you invest, and that you never truly lose the money. There’s an added benefit however that you can win money on this lottery ticket, so it essentially help makes you free money. There’s a lot of people don’t prefer bothering with this approach, because the odds of winning are still worse than investing. However premium bonds are completely tax free, and any winnings. This is my primary reason for investing in these to reduce any taxes I pay. Premium bonds themselves are capped at £50,000, so I have a long time to build up my maximum savings, I’m currently putting away £3000 per year into them. So if I won nothing, I’d have to invest for close to 16 years. At the time of this post as I write this, I hold £3875 in premium bonds (I’ve won twice, £25 when I had around £300, and £50 when I had about £3500). Not much but I’m in this for the long run.
The next source of income I have are Trading212. I split the money between two sources. I have a general investment account on Trading212 and also recently opened up a stocks and shares ISA as another savings wrapper. As you’re allowed to invest up to £20,000 in the UK into an ISA each tax year, to reduce tax. The main benefits on both of these are that they’re both tax free.
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A general investment account on Trading 212, doesn’t incur tax until I withdraw it. As I’m looking at compound interest I have my Trading212 account setup to reinvest anything I earn, in order to speed this up. I do still pay investment and fees on Trading212 but they’re still one of the best sources for investment, because they use DRIP (Dividend Reinvestment) in order to boost earnings, and you can purchase fractional shares. Their fees are also really low.
Now I don’t have much on my Trading 212, but both of them are looking good for the amounts I have invested currently. As a note on the below figures, a rate of return between 10%-15% over a year appears to be good amount
My ISA is currently sitting at £1770.73 (£222.30 gained) with a 24.1% Rate of Return
My Investment is currently sitting at £3128.19 (£256.21) with a 11.3% Rate of Return
As you can see, whilst I hold ~£9000 currently for future planning, over time this should increase to help boost the earnings. When I reach retirement age, I can claim state benefit (I think around £275 per week for my age). Until I reach that stage though I want to maximise the money I put into the savings so that it grows fast.
With regards to dividends on Trading212. Apparently the magic number is £100,000 for when your money starts working for you. It has to mature first, until then it’s any money I win, or make is invested from my own pocket. Once I get to that next stage is when the magic starts happening.
The next stage after this will be a SIPP I think. I may have to do my research, or buy some books on Amazon related to Trading shares as I want to use a general investment account (something like Vanguard or Investor Engine) in order to play about with stocks and shares buying and selling them.
That’s the plan anyway. I’m sure when the government announce the next budget 26th November 2025. Plans will change, as there’s word of the government targeting ISA. In which case I’ll probably pump more money into something they’re not targeting.
