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No savings at 50? Here’s how much I think you need to invest in the FTSE 100 to retire with £1m

Having no savings at the age of 50 doesn’t necessarily mean securing a £1m retirement portfolio is impossible.

However, it does make the task more difficult. After all, the retirement age is set to increase to 67 over the next decade, which means that you’ll have just 17 years to build a retirement nest egg which can provide a passive income in older age.

With that in mind, here’s how much you may need to set aside each month in FTSE 100 shares to build a seven-figure portfolio over that 17-year period.

Return potential

The FTSE 100 has recorded an annualised total return of around 9% since its inception way back in 1984. That’s an impressive rate of growth which shows the UK’s large-cap index offers much more than just a high income return.

However, even assuming such a high rate of return in the next 17 years, it would take a significant amount of capital to build a £1m portfolio. In fact, it would need you to invest £27,000 per annum (£2,250 per month) at an annual return of 9% to meet that goal. Or, investing a lump sum of £232,000 today at the same rate of return over the same time period with no further contributions would have the same end result.

Investment prospects

Clearly, having that amount of capital available over such a long time period may be unlikely for the vast majority of people. However, it shouldn’t dissuade you from seeking to build a generous nest egg for retirement. After all, even generating a smaller passive income which reduces your reliance on the State Pension in older age could be a worthwhile move.

For example, investing a more modest £250 per month could lead to a retirement next egg of £110,000 by the end of a 17-year period. This could realistically produce a passive income of around £5,000 per annum if invested in FTSE 100 shares at a time when the index yields 4.5%. This could certainly provide a boost to your State Pension, as well as offer inflation-beating dividend growth over the long run.

Risk factors

Of course, the FTSE 100 may deliver total returns of above or below 9% per annum over the long run. Risks such as the ongoing global trade war between the US and China could mean there are challenges ahead for investors. But those risks may create more favourable buying opportunities due to high-quality companies trading on low valuations.

Therefore, now could be the right time to invest in a variety of FTSE 100 stocks for the long run. Although obtaining a seven-figure portfolio may not be achievable for everyone over a 17-year time period, the FTSE 100 could offer strong growth that leads to a surprisingly large nest egg from which a generous passive income can be drawn in older age.

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Peter Stephens has no position in any of the shares 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.