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A Simple Retirement Calculator That Helps You Plan Your Retirement Financial Freedom
The earlier you start considering retirement planning the better - even though this might just seem like motherly concern to take a jersey when you go out on a lovely day … just a bit over protective and not really necessary. However it will turn out to be wise advice ... the earlier you start the better off you'll be. Obviously, when you're young, your retirement planning priorities are quite different from when you get older but whatever your age your retirement success is based on two rules: Rule 1: Never touch your retirement savings. Rule 2: Never forget Rule 1. These rules are absolutely critical to the successful outcome of your financial retirement planning. The benefit of compounding is very dependent on time which is very clearly shown in the following examples of the simple retirement calculator. Scenario 1 Assume a starting salary of 100 000 per annum, an annual increase of 4% and yearly inflation of 4%. (These assumptions may seem a bit unreasonable but all we want at this time is an appreciation of the simple retirement calculator). If you save 10% of all your earnings for 30 years and earn a return of 4% above inflation you will have 1.7 million when you retire (which however, will only be worth 530 000 in today's terms!). Next, let's assume that your after retirement living expenses are the same as your final salary and that 30% of your living expenses will be covered by social security (a valid assumption only in those countries fortunate enough to have them). Therefore the balance of 70% of your living expenses will be drawn from your retirement savings. So, for how long will your 10% savings for 30 years last? A not very long 9 years. Now here's the exciting thing about compounding - if you save, on the same basis as above, for 40 years (instead of 30 years) your retirement money will last for 19 years. In other words, the first 30 years of saving buys 9 years of retirement and the last 10 years of saving buys 10 years of retirement. The power of compounding in the simple retirement calculator! Scenario 2 We now look at the same salary, increase, and inflation assumptions as above but increase the savings rate to 15%. After 30 years of saving your pension will last for 16 years and after 40 years of saving, will last for 37 years! Conclusion: It is only after saving 15% of all your earnings for 40 years and getting a return of 4% above inflation that you will be able to look forward to a reasonably comfortable financial retirement. In looking at the above scenarios there are obviously a number of variables that can be changed. But initially it's important just to understand the principles of this simple retirement calculator: Start saving for your retirement sooner rather than later and never touch these savings. Simply put, for a successful retirement save at least 15% of all your earnings for 40 years! Article Directory: http://www.articledashboard.com About Author: |
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