25 year plan

25 years

Investing is a great hobby. I like to do it and it makes me money. What is even better, it creates a passive income stream that can pay for expenses in the future. However, at the moment I’m just investing without a plan. I have no idea where I will end up. To get things a bit more clear I am trying to create a 25 year plan in which I calculate the value of my portfolio and the height of dividends for the future.

Assumptions

For this calculation I used very conservative numbers. I assume a 3% growth of value for my portfolio and I kept using a 4% dividend which means that the dividend would grow in line with the value increase (which is 3%). Further I deduct 15% in taxes from the dividend.

I assume that I can keep a contribution of € 5.000 a year in fresh capital. For calculation of dividends I calculate the 4% over the value the portfolio had the year before and I use half of what it increases that year since I will get the increase in value during the year and not all the new money can pay dividends for the whole year (I hope this makes sense 🙂 ).

 

The numbers

Without further ado, let’s get over to the interesting part!

25 year plan

YearFresh additionTotal money investedDividend earnedRealized investmentRealized dividends
201610.00010.000,00170,009.782,68213,48
20175.00015.470,00432,99
20185.00021.367,09626,23
20195.00027.634,33833,02
20205.00034.296,381.052,82
20215.00041.378,091.286,47
20225.00048.905,901.534,83
20235.00056.907,911.798,94
20245.00065.414,092.079,47
20255.00074.455,982.377,79
20265.00084.067,452.694,90
20275.00094.284,373.031,98
20285.000105.144,883.390,30
20295.000116.689,533.771,18
20305.000128.961,394.176,17
20315.000142.006,404.606,45
20325.000155.873,045.063,95
20335.000170.613,185.550,27
20345.000186.281,856.067,22
20355.000202.937,536.616,73
20365.000220.642,397.200,86
20375.000239.462,528.781,61
20385.000260.428,018.498,14
20395.000281.738,999.216,84
20405.000304.408,009.964,49
Assumptions for calculations:
- Value growth of 3% per year
- 4% Dividend on average
- Dividend grows in line with value (3%)

 

As you can see, with the numbers I used, I should receive roughly € 10.000 Euro a year in dividends after 25 years. Is this a reliable estimate? Probably not. So much can change and my assumptions could be completely wrong. I could add more or less than the 5.000 a year and who knows what happens with the world in 25 years..  That’s also why I used conservative numbers. usually that means the real situation should look brighter and I like that!

 

Conclusion

Still, 10.000 a year in additional income combined with a house that is completely paid for should give us a lot of room to at least work a lot less than what we are doing now. And we already work only 4 days a week. I still regret it a little that I didn’t find dividend growth investing 10 years earlier, but aside from that, I’m very happy with what I’m doing.

Do you make a 25 year plan (or other long term plan) for your investing? How do you make it and are you satisfied with the numbers you get? Also, what do you think of my 25 year plan? Any advice on improving it is also more than welcome! I’m looking forward to your reactions!

7 thoughts on “25 year plan”

    1. Thank you Investment Hunting! I kept it conservative on purpose. I see it as a minimum result in 25 years. At least I know what I should be getting.

      How it will really turn out. Nobody knows. 🙂

  1. That is a very conservative plan, especially with the 3% value increase annually. The moral of the story here is look at the power of dividend re-investment. Once the engine gets rolling, watch out. The sooner you can start it the better. One other thing that is over emphasized is that you need to know exactly where/what you want to do at the end of the plan. Who the hell knows?? What you do know is that after 25 years you want to have a massive amount of dividend income so you can pursue whatever the heck you feel like doing. Now that is a plan I am digging.

    Best of luck on the 25 year journey. Happy to be a part of it.
    Bert

    1. Thank you for the reply! It is conservative indeed. Part because I feel better with a plan I am likely to beat. Part because I am starting at a point where I feel the market is reaching it’s peak. Like this, I hope to be in for a nice treat!

      I did account for dividend reinvestment. I added the value of the dividend to the value of the stocks in each year.

      I agree with the end goal. It is way to early to know exactly what I will be doing in 25 year. We now have a 1 year old daughter. Who knows what the future brings. At least I can be sure that I have enough money available to do whatever I want. For me, that is freedom and that’s the journey I’m on. 🙂

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