Retirement Mathematics: Toughest ever
What is so scary about retirement? The big worry that you will run out of money before you die. Rather you OUTLIVING your money.
Is it a fear? I think it is a nightmare especially for those who do not have assets which they are NOT USING, children not doing well, and those women who have lost their husbands when they are young – say around 45 years of age and HAVE NO INVESTMENT SKILLS at all.
Your retirement mathematics needs the following:
1. At what age will you retire (you do not know)
2. How much will you be able to invest regularly from now till retirement (you do not know)
3. With all your resources at what rate will this investment grow (no clue!)
4. Going from point no. 3 – how much will your retirement corpus be (function of points 2 and 3 above)
5. How much will be the post retirement inflation be (no clue)
6. What will be the withdrawal rate at which you will withdraw (depends on your needs and inflation)
7. At what rate will your Investment portfolio grow. This again is a function of how your stomach will perform when equities tank, real estate stagnates, interest rates fall and your hospital bills are only paid partially by the insurance company.
8. Given the uncertainties of how long you will live, how long will your spouse live, whether your children will support you (or will they need it) any number that you estimate is a guess. Complete guess work.
When you use Pattu’s retirement calculator please remember the above 9 points. Just a suggestion.
Even better start on a whiteboard. Will save you effort.
SR
Dear Shinu
So the mantra is, “be afraid, be very afraid” and do not leave your wheel of fortune 😉 Run SR Run!!
http://fitnessgurunyc.com/wp/wp-content/uploads/2010/05/mouse-wheel-324×205.jpg
Krish
@ SR. Congrats for early success. However few pointers.
Earlier we saw the double digit FD interest rates but no longer the scenario now. To achieve the economic growth, I suspect most of the governments would choose to punish the savers. So you have a risk of lower interest rates which could be very well possible if not now but in coming decades.
I am also worried that more tax may be levied in future on interest income from debt instruments reducing our cash flow. Going by recent Cyprus example, we can not rule out any possibility. Most of the govts may think no wrong in taxing rich and may go to any extent to make savers bankrupt.
If you are not able to generate the annual income through savings, at times you may think of going back to Job. The market may consider your profile outdated and consequences could be no job or a lower end job which could trigger a mental agony.
Instead of early or timely retirement, I am comfortable with idea of ‘work till grave’
DrDoubt
There is a discussion on DrDoubt on retirement calculators as well:
http://drdoubt.com/question/213/retirement-planning-pointers-to-any-good-calculators/
mrs. archana k
Dear Mr Subra,
I would like you to look at out modest portfolio if that is possible.
do let me know how do i contact you and your charges,
Many thanks .
Archana
subra
Archana
subramoney.rich@gmail.com
i do check my mails once a week 🙂 little tardy but not too bad i guess…