Alison BloomerA stock market trader has more chance of securing enough cash to ditch the day job than a National Lottery ticket holder. But how much is enough?
According to a recent survey of 2,000 UK adults, the average person would need at least £5.4m before they burst into their boss’s room to deliver the good news that they were quitting. The odds of winning that sort of jackpot on the National Lottery are one in 45 million.
The research was conducted by online games destination, WinkSlots.com, as part of the Working after Winning report. It found that 36% would continue working if they won a substantial amount of money, 16% would work for a charity and 11% would retrain for a different career.
Security for the long-term future
Was it because a third of the respondents loved their job so much that they opted to keep working despite a big win? Or was it because most of us are cautious about having enough money in the long-term to last until retirement?
The fear of running out of cash is real. There have been several high-profile UK lottery winners who have ended up broke. In the US, the National Endowment for Financial Education has estimated that 70% of lottery winners go bust.
That could be why the Working after Winning survey found that 11% would retrain for a different career with 21% saying they would choose to do so in the digital media industry, 18% in film and 14% in music.
According to Stephen Womack, director of chartered financial planner David Williams IFA, deciding whether a windfall is enough to retire on is very much down to personal preference.
He said: “As a business we work with a number of successful entrepreneurs who have built, grown and sold businesses. Some come to us looking to preserve the real value of the capital they have built up; others are keen to find opportunities to keep on growing their wealth.
“I would say that the majority feel it is enough to know they will always have a comfortable roof over their head, they will never have to worry about day-to-day spending and that their family is looked after. Beyond that, additional wealth buys you choices and opportunities, be it the villa in the sun or the ability to bankroll the charitable project of your choice.”
A survey found that the average person would need £5.4m to quit their job. Source: ShutterstockWould £5.4m be enough?
With an ageing population and rising personal debt, early retirement seems like a pipe dream for many. Yet in January this year, the US Bureau of Labor Statistics Job Openings and Labor Turnover Survey reported that 3.2m workers quit their jobs. That was the most since February of 2001, in the wake of the dotcom bubble.
In the UK, some 60% of those planning to give up work in 2017 are doing so earlier than their projected state pension age, or company pension scheme retirement date, a survey by Prudential also found.
So, would the average Briton really need £5.4m to never work again and why for some would even this not be enough?
According to Womack, if you were to invest £5.4m in a relatively moderate risk portfolio and see it grow by 4% a year after all costs, you could draw an income of £150,000 per year.
This would grow with inflation at 2.5% for the next 50 years before the money runs out and if you can achieve 5% annual return on the investments, then the starting income rises to just over £180,000 per year.
He said: “It depends on the age of the investor (and of course their spending ambitions). £5.4m at age 25 looks very different to £5.4m at age 65 in terms of what you need it to provide for you. But let’s be honest, the vast majority of us would bite your hand off when offered that sort of sum to then not work again.