I’ve now been plugging money into my Go T’ Pub ISA for the last 4 months and, naturally, I start looking to the future as I see month on month growth in the value of it. One of the thing I enjoy about reading blogs is seeing people progress towards FI.
So, if my target retirement date in 2025 is to happen, what might the Go T’ Pub ISA look like? Will I be in a swanky pub or wine bar every day or will I be having an occasional water only? One thing I do seem to have missed somewhere is what people think their end goal will be or how they are going to get there in detail. Sure there is the “I need to get £X,000 to do it” but I’ve not seen many forecasting it (feel free to point me in the direction of where there is!). RIT had a very good graph showing his progress going up, but nothing that included a forecast line.
Given that, I wanted to share my thoughts now that the GTP ISA is up and running and to look at how I see it panning out. If I am really honest, this is a totally pointless exercise 🙂 The money isn’t going into a savings account and who knows what the markets will do… but I know it will be interesting to look back over the years and see how it pans out, and this is a way of recording what I thought would happen. Again, I know I am putting in more per month than a lot of people will be able to do but this only means it may take a bit longer. The aim is to show how it pans out against how I thought it would. The forecast date I am taking this to is June 2025, and I am going to enjoy looking back at my spreadsheet to see how it is tracking.
So the first port of call is the standard calculator to see what a regular drip feed would look like into a regular savings account paying out.
So, from the basic approach, how does this look?
- 2% return – £114,414
- 4% return (my standard assumption) – £124,210
- 7% return – £141,018
- 10% return – £160,799
- 12% return – £175,920
So, worst case it is still going to be over £114k. So hopefully around the £350 – £400 per month by 2025 being generated. A long way from providing for FIRE, but a good healthy social budget.
Now, that is a bog standard savings rate, which of course isn’t going to apply with the money going into the markets. So, time to have some spreadsheet fun!
So firstly, lets state some of the basic assumptions that are being made here to give some of the baseline numbers.
- Although the prices may go up over time, I am assuming I will buy 18 VWRL each month
- I have incorporated the additional VWRL I bought in July
- To start, I will take the base that I will not be reinvesting dividends – as this is supposed to be paying for my social life (although I suspect I will aim to reinvest)
- It runs from when I started this in 2017 through to June 2025
- I am ignoring inflation, or price increases on the grounds that I will adhere to assumption #1
So – what does that mean as a baseline?
18 units a month, and no dividends reinvested, I will get to June 2025 with 1,765 VWRLs – at current dividend rate of £1.20 per year (handily 10p a month!) that will give me an annual income of £2,118 – or £176.50 per month. Not brilliant, but not too bad income without having to do anything at all I guess – not a retirement amount but not to be sniffed at either.
So what happens if I were to not use the dividends to buy a pint or two, but reinvested them? Well, last year VRWL paid £1.20 per unit over the year, or 30p on average per quarter (I am going with 30p average for ease). What happens then?
Well, again I am just using the earned dividends and not adding any extra cash (which I reserve the right to!). Well, that means on June 2025 I would have 1,895 VWRL. 130 extra units just by not taking any money out, how cool is that? Well, again going on £1.20 per year income, that would give an annual income of £2,274 – or £189.50 per month. An extra £13 per month just for not taking the cash out.
Now, what if I were to try and not only reinvest the dividends, but also squeeze an extra unit each month – so transferring in an extra 50 or so quid at the end of each month? That would mean I would buy 19 a month from now on instead of 18.
This 1 extra unit per month compounds to 1,997 units. That would give an income of £2,396.4 or £199.70 per month. I have to say I would love to make it over the £200 per month if I can by 2025 – in effect needing £600 per quarter – which would require 2,000 units.
What I find strange is that this is lower than the £350 – £400 I predicted above. I guess that is reflected by the fact that VWRL is currently generating about 3% income not the 4% I used in the calculation above. Either way, this pointless exercise is going to be interesting to see how things pan out!
Out of interest I decided to look at the “best case” scenario as well. That means using the full £20,000 per year (assuming it doesn’t increase) and see what that looks like. Well, that’s 27 units per month, or with the dividends reinvested 2,810 VWRLs – which would generate £281 per month. Ah I can but dream!
So – I think I will set my initial goal at hitting 2,000 units – which means I need to buy an extra 235 units over the coming years (roughly 30 a year extra). That’s a tall order, no two ways about it. The best time to add the extra units is as early as possible so I need to knuckle down hard and try to squeeze as much extra cash out as possible – the sooner I earn enough in dividends to buy an extra unit the better. Let us see….
I will look forward to revisiting this post over the years and see how I do!
How much detail do you go into when planning into the future? Do you breakdown by month or just aim for a rough end game?