How much do you need in a Stocks and Shares ISA to aim for a £250-a-week retirement income?
A Stocks and Shares ISA’s a brilliant way to build long-term wealth for retirement. The tax advantages are huge, since all growth and dividends are free from HMRC, and withdrawals are completely tax-free too.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Itâs a flexible and powerful way to invest for anyone planning ahead. Aiming for £250 a week in retirement works out at £13,000 a year. Using the 4% withdrawal rule, which assumes investors can take 4% from their pot each year without eating too far into the capital, that requires a pot of around £325,000.
That might sound a big ask, but time is the investorâs secret weapon. Someone who puts away £300 a month for 30 years, and earns 7% annual growth, could reach around £363,800. The key is to reinvest every dividend along the way, letting compound growth quietly do the heavy lifting.
Playing the long game
Market volatility’s inevitable, but regular investing helps smooth the journey. Personally, I target individual UK stocks with reliable dividend potential and growth prospects too.
The FTSE 100 and FTSE 250 are packed with companies that pay steady income streams. Understanding how theyâre valued using discounted cash flow or simple earnings multiples can help identify when a share looks good value.
Right now, one stock thatâs caught my eye is Barratt Redrow (LSE:BTRW). Itâs been a tough period for housebuilders, with higher interest rates squeezing affordability and inflation pushing up costs. The share price is down around 22% in the past 12 months and trades near 387p, which is roughly 38% lower than a whole decade ago. This might just be a buying opportunity.
Barratt Redrow’s a recovery play
The housing market remains subdued, and speculation that a new property tax might replace stamp duty has dampened sentiment further.
The companyâs results on 17 September showed grounds for optimism. Annual adjusted pre-tax profit rose 26.8% to £591.6m, comfortably beating forecasts, helped by £20m of merger cost savings. Thatâs double what management expected. Completions missed earlier guidance, but margins improved.
The trailing dividend yield now stands at 4.57%, while the shares trade on a price-to-earnings ratio of about 15. That looks appealing for anyone seeking income as well as potential capital growth. If interest rates start falling, sentiment across the housing sector could turn quickly.
Patience pays off
After such a difficult decade, itâs understandable some investors remain cautious about housebuilders. Brexit, the pandemic and the cost-of-living crisis have all left their mark. Even so, demand for new homes continues to outstrip supply, and the government’s signalled it wants to speed up planning approvals. That could create a better backdrop for builders like Barratt Redrow over the next few years.
No one knows when the share price will recover, but I think this is a stock worth considering for patient investors with a long-term horizon.
Building a £325,000 ISA wonât happen overnight, but with consistent investing, the miracle of compound returns and a few well-chosen dividend shares, that £250-a-week retirement target looks achievable.
The post How much do you need in a Stocks and Shares ISA to aim for a £250-a-week retirement income? appeared first on The Motley Fool UK.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barratt Redrow. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
