How you can become an ISA millionaire in 20 years

Saving £1m by 2039 could be easier than you think. Here’s how you could do it.

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.

You want to retire before you’re too old to have some fun and enjoy your leisure. And you reckon you’ll need a £1m fund to make sure you can live — and spend — comfortably.

£1m sounds like an ambitious target in 20 years, but it could be easier than you think. Here’s what I think you need to do.

Is £1m enough/too much?

Although it sounds a lot, a £1m retirement pot could be a reasonable assumption for many of today’s workers.

Financial advisers use the 4% rule to calculate how much you can withdraw from a savings pot if you want it to last 30 years. If you’ve got £1m, then you should be able to pay yourself £40,000 each year, plus increases for inflation.

Although I’d argue that many people can manage with less, there’s no doubt £1m should fund a long and comfortable retirement.

How much to save each month

With such long-term planning, we can’t be sure exactly what your money will earn each year. But what we can do is rely on long-term average rates of return from the past. Over a 20-year period, there’s a good chance that historical patterns will repeat themselves.

If you want to save £1m in an ISA, then you have three basic choices — cash, bonds or stocks. Here’s how each asset class performed on average between 1899 and 2016:

Asset class

Average annual return 1899 – 2016*



UK government bonds


UK stocks


*Source: Barclays Equity Gilt Study 2016

As you can see, over long periods, the UK stock market has delivered considerably greater returns than either cash or government bonds.

Using these rates of return as a guide, I’ve done the sums to work out how much you’d need to save each month to reach a million in 20 years:

Asset class

Monthly ISA contribution

Total contribution each year




UK government bonds



UK stocks



I should stress that these are estimates. No one can tell you with certainty how much you need to save today to have exactly £1m in 20 years’ time. But I do believe these numbers are a realistic guide to how much you’d need to save.

How would this work?

The annual contribution limit is currently £20,000. This is important. As you can see above, only by putting your savings into the stock market can you save enough to reach £1m and stay within the ISA contribution limit.

Although you could save in a taxable stocks and shares account instead, this could leave you liable to big tax bills in the future. In my opinion, the tax-free qualities of an ISA account give long-term investors a huge advantage.

Where should you put your cash?

You could choose to invest in individual stocks, in the hope of picking winners and beating the market. But doing this successfully over 20 years would require a lot of work and some luck.

In my opinion, it makes much more sense to put your cash into a cheap FTSE 100 tracker fund inside an ISA. Use the accumulation option to reinvest all dividends automatically, and setup your monthly payment with a direct debit. Then forget about investing and get on with enjoying life!

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.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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

7%+ dividend yields! Here are 2 of the best UK shares to consider buying in June

This Fool has been searching for UK shares with the best dividend yields. Here are two he thinks investors should…

Read more »

Investing Articles

5 FTSE 100 shares to consider buying for passive income right now

The FTSE 100 is having its best start to the year for ages, and that's pushing the top dividend yields…

Read more »

Investing Articles

One overlooked cheap share to tap into the year’s hottest theme?

This Fool describes the key things to think about when investing in copper stocks and analyses one cheap share to…

Read more »

Investing Articles

A cheap FTSE 100 stock that’s ready for a dividend hike in 2024

This banking giant is one of the FTSE 100's greatest dividend stocks. And at current prices, our writer Royston Wild…

Read more »

Growth Shares

Is the BP share price set to soar after Michael Burry invests in the firm?

Jon Smith takes note of a recent purchase from the famous investor behind The Big Short and explains his view…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

I’d focus on Kingfisher now after the Q1 report leaves the share price unmoved

With the share price near 262p, is the FTSE 100’s Kingfisher a decent investment now for dividends and business recovery?

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

£500 buys me 493 shares in this 7.4% yielding dividend stock!

The renewable energy sector remains out of favour. As a result, there are some high-yielders around, including this dividend stock.

Read more »

Road trip. Father and son travelling together by car
Investing Articles

If I’d put £10k into Tesla stock 2 years ago, here’s what I’d have now

Tesla stock has fallen in the past few years. But the valuation looks temptingly low now, as we approach a…

Read more »