Who wants to be a £85.6 milliionaire?

[The Ferryman]

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This was posted by my friend Zoe at cashquestions.co.uk

There was some interest in what it means to be a millionaire in another thread. This will give an indication of how much you need!
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Someone would need £85.6 million today to enjoy the equivalent lifestyle of a person with £1 million in 1907, demonstrating how dramatically inflation has reduced the spending power of £1 million over the past 100 years.

Alternatively, £11,700 in 1907 would have had the equivalent spending power to £1 million today, according to new research from Clerical Medical.

Looking over the past 50 years, an individual would need £17.2 million today to fund the same lifestyle as someone with £1 million in 1957. Somebody would now need £2 million to have the same spending power as having £1 million in 1987.

Even the relatively low inflation of the past 10 years has had a marked effect on the value of money so that someone would need £1.3 million to have the same spending power as £1 million in 1997.


Table 1: Today's equivalent to £1m in the past

1907 £85.6m
1927 £44.7m
1947 £27.9m
1957 £17.2m
1967 £12.9m
1977 £4.4m
1987 £2.0m
1997 £1.3m



Inflation will markedly reduce the value of £1 million over the next 50 years even at low rates

Low rates of inflation will still significantly reduce the spending power of £1 million over the coming years. The value of £1 million will be cut by nearly two-thirds over the next 50 years even if inflation rises in line with the government's target of 2% a year. In these circumstances, an individual will need £2.7 million in 2057 to fund the same lifestyle as £1 million today.

The corrosive effects of inflation mean that a lump sum of £1 million is worth more to a 50 year old compared with a 20 year old. When today's 50 year old reaches the age of 60 in 2017, £1 million will be worth £820,300 in today's terms. This is in sharp contrast to today's 20 year old whose £1 million will be worth £452,900 when they are 60 years old in 2047. (Calculations are based on annual inflation of 2% a year.)

£1m still remains a considerable sum

Although £1m no longer finances the lavish lifestyle it once did, it remains a substantial amount of money. For example, placing £1 million in a high interest savings account paying 5% would yield gross interest of £50,000 per year, or £38,889 after tax (assuming no other income).


Rob Devey, managing director, commented:

"There is no doubt that £1 million is still a lot of money although inflation has substantially eroded its purchasing power over the past 100 years. The value of £1 million will be reduced significantly further over the next 50 years even if inflation is kept firmly under control.

Whilst £1 million is no longer enough to fund a lavish lifestyle, it can still go a long way with careful financial planning."


The calculations in this release are based on ONS inflation figures. Source: Long term indicator of prices of consumer goods and services (code:CDKO)

[angelabx]

As I mentioned in the other thread ...

I was reading an article in Money Week Magazine that quoted a leading private bank as saying that a person now needs £2.6m to lead what they would class as a "millionaire lifestyle".

It is quite scary how much savings erode over time.

I think the errosion would be far in excess of the target 2% p.a.

I'm 40'ish and if I were to live off the income my savings generate then the capital would be worth precious little when I'm 70!

It's amazing how much you really need to save to 'retire' early. A lot more than you may think (unless you're an investment whizz!)

[ian]

I think the errosion would be far in excess of the target 2% p.a.

I'm 40'ish and if I were to live off the income my savings generate then the capital would be worth precious little when I'm 70!

It's amazing how much you really need to save to 'retire' early. A lot more than you may think (unless you're an investment whizz!)

You don't need to be an investment whizz, just know someone who does. "Wealth management" is a great phrase, and you can get some amazing returns if you have a decent amount to invest. I won't advertise the details one here, so PM for details.

Rates can fluctuate, values go up and down, etc etc

[essdeekay]

Here are some interesting figures for you -

1962 FTSE All-Share started 8.10% per annum compound

1984 FTSE 100 started 19.84% per annum compound

Gold

1907 $22.66 per ounce
2007 $669 per ounce

A return of 3.54% per annum

1983 Halifax House Price Index 7.83% compound per annum

Over the medium to long-term all my money is and will be going into asset-backed investments.

Si (ex-IFA - no advice given here under FSMA 2000)

The value of your money, and the income from it, could fall or rise. Your capital is not guaranteed......

[Orotava]

A few of my friends are having great fun buying leaps then selling call options.
They getting an average MONTHLY return of 11%.


If you start off with 100K and compound 11% a month you will be a
millionaire in no time.