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A £1 million ISA: can the average person achieve it?

You often read about people who have done extremely well with their ISAs and built up million-pound portfolios through regular saving. According to a recent article in The Telegraph, there are now around 1,000 of these ‘ISA millionaires’ across the UK. But is a million-pound ISA achievable for the average person?

The answer, in my view, is most definitely yes. That said, to achieve one, you will have to do things a little differently to the average saver, who, in general, starts saving later in life, saves a low percentage of their income, and saves their money in a Cash ISA earning a pittance.

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If you want to build up a £1m portfolio by the time you retire, you’ll need to take specific steps that will enable you to get there.

Start saving early

Probably the most important thing to do if your goal is a £1m ISA is to start saving early as this will give you more time to build up your savings pot. Start saving into an ISA at 25, and a million-pound portfolio is definitely a realistic goal by the time you hit your 60s. However, leave saving until your 40s or 50s, and it will become much harder to hit the million-pound mark as unless you’re earning a CEO’s salary, you simply won’t be able to save enough to get there.

Save regularly

It’s also important to save on a regular basis and the best way to ensure you do this is to pay yourself first. So, whenever you receive your salary, immediately transfer out a proportion of your income into your ISA. That way, you won’t be tempted to spend the money and your savings will build up quickly.

Lifetime ISA bonuses

If you’re under the age of 40, it could also be worth considering taking advantage of the bonus money that is available on the Lifetime ISA. With this ISA, you receive a 25% bonus on contributions up to £4,000 per year up to age 50. A bonus of up to £1,000 per year could certainly help you get to ISA millionaire status faster.

Earn a good return

Finally, you’ll need to ensure that your money is working hard for you and earning a good return. The best way to do this? Growth assets such as stocks and funds. You’re able to hold these kinds of assets in both the Stocks and Shares ISA and the Lifetime ISA.

With growth assets, it’s not hard to pick up returns of 6% to 10% per year over the long run, which is far higher than the returns from Cash ISAs. With your money growing at that level, achieving a million-pound ISA becomes far more achievable.

For example, according to my calculations, if you started saving £4,750 per year (less than £100 per week) at age 30, increased your savings by 2% per year every year, and generated a return of 8% on your money, you’d comfortably hit the million mark by age 65.

So in summary, a million-pound ISA is certainly an achievable goal. Save regularly and get your money working for you, and you’ll be well on the way to joining the illustrious ISA Millionaire club.

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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.