Earning a million pounds sounds like an impossible dream, but over the course of a lifetime you’d be surprised how much you can make.
According to Prudential, teenagers starting their careers this year will have earned their first million just after their 46th birthday – and will earn more than £2m in their lifetime.
Analysis of the latest ONS stats shows that an 18-year-old starting work in 2016 and earning the project average salary for their age group throughout their career will pass the £1m mark in 2044 at the age of 46 years and one month.
But they will also have paid about £138,500 in tax and £99,680 in national insurance – more than £238,000 in total.
The analysis is based on figures from the latest ONS (Office of National Statistics) Annual Survey of Hours and Earnings and assumes future wage inflation will mirror average pay increases seen between 2006 and 2015.
Prudential said the impact of tax on a lifetime’s earnings can be reduced by saving into a pension.
Someone earning an average amount and paying 5% of their income into a pension throughout their career could receive tax relief of £10,000 on their first million.
Vince Smith-Hughes, a retirement income expert at Prudential, said: “For many people it can be surprising just how much a lifetime of earnings can add up to.
“With many people now working until later in life, someone earning the projected average salary over their career can expect to earn a total of over £2m in their lifetime.
“With this in mind, the approach of saving as much as possible as early as possible in life is the most likely way for most people to be able to secure a comfortable income in retirement.”
He said workers who pay into workplace pension schemes will benefit from employer contributions as well as making a dent in the amount they hand over to the tax man.
“There are many different types of saving products with different levels of tax efficiency depending on your circumstance, and it should be remembered for example that the new Lifetime ISA will be another option when it becomes available in April 2017,” said Mr Smith-Hughes.
“As the options open to savers increase, so does the value of taking professional financial advice.”