Pension pot

[Patgdirector]

I have a figure of €1 million to have in my pension pot when I retire in 20 years time. If a person has €500k in their now and made no contribution for the next 20 years would it be off the scale to think I would have €1 million in their at 65.Company plan so charges would be low

 

[Sarenco]

I'm guessing you mean €1m in 2017 terms.

That equates to a real (inflation-adjusted) compound annual growth rate of 3.5% (after all fees and expenses). I personally wouldn't expect that level of return over the next 20 years on the assets that make up a typical Irish pension fund but it's certainly possible - if history is any guide. Well within the range of possible outcomes.

 

[dub_nerd]

You would also presumably need to leave the funds in riskier assets right up to the end, otherwise you'd need an even higher rate of return in the early years. Any significant bump in the road in the latter years would then be harder to recover from. If, on the other hand, the last five years is in safer assets returning an inflation-adjusted 1% after charges, then you need to average 4.4% for the first fifteen years. Sounds a bit optimistic.

 

[Steven Barrett]

Assuming 2% inflation, €1m today is €1,485,947 in 20 years time.

If you have €500,000 now, you will need for it to grow at 5.597% net per annum to achieve your goal. Not an impossible task. You would be looking at investing the bulk of your portfolio in equities.


Steven
www.bluewaterfp.ie