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No savings at 50? Here’s how I’d retire with a million without winning the National Lottery

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Having reached 50 years of age with no pension savings, it may be increasingly tempting to gamble on the National Lottery. However, it’s never too late to start saving for the future.

I think it may even be possible to build a £1m pension pot from a standing start at 50 without having to resort to gambling. 

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National Lottery gamble 

Turning to the National Lottery to provide a quick cash infusion may seem like the best course of action for some to build a large nest-egg quickly. But I think this is a waste of money.

Chances of winning the lottery are 1 in 45,057,474. To put it another way, there’s a 99% chance of not winning. 

I think investing in the stock market is a much better option. The chances of generating a positive return are also substantially higher. Indeed, over the past 35 years, the FTSE 250 has turned every £1k invested into £65k. By comparison, I know people who’ve been playing the National Lottery for decades without winning anything remotely substantial. 

What’s more, I reckon it’s possible to retire with a £1m nest egg using stocks and shares, even with no savings at 50. 

Close-up Of A Piggybank With Eyeglasses And Calculator On Desk

Investing for the future

There are a couple of things I’d do to accelerate the growth of my savings pot if I had reached 50 with no pension put aside. 

Firstly, I’d open a Self-Invested Personal Pension (SIPP). These products have significant tax advantages. Any contributions attract tax relief an investor’s marginal tax rate, that’s 20% for basic rate taxpayers. So, for every £800 contributed, the government would add an extra £200 to take the total up to £1,000.

Moreover, any income or capital gains earned on investments held inside one of these wrappers is tax-free. 

I believe that by using one of these products and the stock market, one could retire with £1m.

How to make £1m

My figures show that contributions of just £800 a month would be enough to hit this target within two decades. This forecast assumes the money is invested via a SIPP and attracts 20% basic rate tax relief. This would boost the monthly contribution to around £1,000. For a total of £12,000 a year.

Invested at an average annual return of 12%, the average for the FTSE 250 over the past three-and-a-half decades, I estimate the pot could be worth just over £1m within two decades.

That might mean the average 50-year old would have to work a bit longer, but that seems to me to be a worthwhile trade-off.

It would only take an extra couple of years of working past the current State Pension age to hit this target. I estimate the £1m fund would be enough to provide an average annual income of £40,000 in retirement. 

By comparison, relying on the National Lottery means more than likely ending up with no savings whatsoever. I know which option I’d rather take. 

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Rupert Hargreaves 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.

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