The easy way to save £1 million — when you have nothing saved by age 50

Yes, it is possible to make a million for retirement if you have nothing saved at 50.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Saving for retirement can seem like a daunting process, which is why so many of us put it off until the very last minute, and some don’t do it at all. 

Last year it was reported that around one in seven retirees was quitting the workforce with no workplace or personal retirement pot making them entirely reliant on the state handout. Currently around £8,500 per annum, the total value of the state pension is well below the average wage and around half of the £15,000 that surveys have suggested is the minimum level of income required to be comfortable in retirement. 

The good news is that even if you have no money set aside at all by the time you turn 50, you can actually still end up retiring a millionaire.

On the road to a million 

To make a million for retirement if you start saving at 50, you just need to commit to working longer, maxing out your retirement plan, and investing your savings wisely.

While it is easier to make a million if you start saving early, as you have the power of time on your hands, the average weekly wage for workers in their 50s is around £1,000 a month higher than 20-year old workers, which should mean you have more cash available to put away. 

The first step on your savings journey should be to open a SIPP. The advantage of this product is the tax benefits it offers, which will accelerate your journey to £1m. Any personal contributions you make, up to the amount you earn, are given basic rate tax relief at 20% meaning that you can add a maximum of £32,000 a year with a government top-up of £8,000. To hit this target, you’ll have to put away £2,666 a month. 

Investing for the best returns 

A SIPP isn’t the only method of saving, but it is the most tax efficient. As well as the government top-up, you pay no capital gains tax or income tax on dividends from investments held within the wrapper. To be able to hit the £1m mark, you will have to invest this cash to achieve the best returns. Luckily, investing has never been easier. A simple investment in an FTSE 250 tracker fund has produced a return of around 9.5% per annum for the past decade, enough to turn your £32,000 per year contribution into £666,000

To hit the landmark £1m, you’re going to have to save a bit longer than 10 years. Although, if you’re putting away £2,666 a month you should be able to quit the rat race at 63 (if you start at age 50), three years before the state retirement age (66 by 2020). 

If you can’t afford £2,666 a month, it’s still possible to make a million by saving just £1,000 a month, although you’ll have to delay retirement by a few years. Saving £1,000 a month works out at £15,000 a year including the government bonus. At 9.5% per annum, it will take 22 years for you to save £1.1m giving you a healthy retirement pot at age 72.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »

Investing For Beginners

How I’d aim to grow my Stocks & Shares ISA from £20k to £1m

Jon Smith explains how diversification and focusing on sectors for the future can help grow his Stocks and Shares ISA.

Read more »