The best pension plan ever!

[Victor90]

When you turn 20 years just put £100 000 in bonds (not junk bonds) with a 10% intrest per year, all the intrest you earn you use to buy more bonds. Then when you turn 60 you will have £4 525 925. And if we adjust it for a 3% inflation you will have: £1 338 371

And if you buy junk bond and get lucky and dont have any defaults you can make:
£146 977 155 <--- Oh lala

Forgot taxes! But if your money is offshore...

 

[Hoggums]

Ok Baldrick - slight problem with that cunning plan.

A) assumes you have £100K when you are 20.
B) assumes you can find a non-junk bond with 10% yield.

 

[£10kLoser]

In addition, £4.5M won't be worth so much in 40 years time...

Perhaps the price of a 1 bed flat in an average area.

 

[Victor90]

1. This is not really seiuse, but the state bonds for iceland is on 9.8%.

In addition, £4.5M won't be worth so much in 40 years time...

Perhaps the price of a 1 bed flat in an average area.

"And if we adjust it for a 3% inflation you will have: £1 338 371"

 

[£10kLoser]

9.8% Interest rates are meaningless in other currencies because they may have 10.8% inflation relative to the pound.

 

[grantx]

Victor,

Why not invest in Zimbabwe Inflation-linked bonds?

Grant.

 

[timsk]

In addition, £4.5M won't be worth so much in 40 years time...

. . . at which point the 20 year old will only be 60. Given the increase in life expectancy and, by then, a retirement age of - I dunno, say 75, the £4.5M will be worth even less!:
On a more serious note, the magic of compounding really is just that - magic. When I become a dictator, it'll be a part of the school curriculum. When Mrs timsk and I bought our first home together (a flat) in 1990, we had a 95% mortgage at a time when interest rates were at 15%. Major ouch! I read a book at the time which explained the 'magic' of compounding and I was hooked. We agreed that as interest rates fell and our salaries increased, we'd save the difference. Result: mortgage paid off in seven years. The only drawback was that Mrs. timsk then decided she wanted a house with a garden, and so the whole cycle started all over again. We're now on property No. 4.

 

[rathcoole_exile]

Victor do you have any iberian cousins ?

 

[MrGecko]

Oh that's an easy one - you should be on property number one still, but Mrs Timsk number 4 by now

lol

Though I am told Houses are cheaper than Wives.

 

[BerkshireBull]

Ok Baldrick - slight problem with that cunning plan.

A) assumes you have £100K when you are 20.
B) assumes you can find a non-junk bond with 10% yield.

Additional problem:

C) You get taxed on the interest earnt too!