Simple Facts about Financial Planning you should be aware of…
1) Once you reach the age of 65, your average life expectancy is
-> 85 years if your are male non-smoker
-> 88 years if you are female non-smoker
(based on mortality table)
2) Once you and your spouse reach the age of 65, there is approx. a 10% chance that one of you is going to be 100 years or older.
(based on mortality table)
3) Even at a modest 3% annual inflation, prices double approx. every 23
years.
4) If you retire today and would like to spend 60’000 dollars each year
(5’000 per month; inflation adjusted) on top of your social security
benefits, you need a capital base of more than 1 million dollars.
(assuming 22 years of drawdown starting at age 65, 5% investment returns p.a. and 3% inflation p.a.)
5) If you are 35 years of age today, the 1 million dollars capital base
mentioned in point 4 translates to a required capital base of approx.
2.4 million dollars by the time you retire.
(based on retirement age 65 and 3% inflation p.a.)
6) If you are 35 years of age today and your goal is to achieve the above
mentioned withdrawal of 60’000 dollars each year ((5,000 per month)
adjusted for inflation, you need to save approx. 24’000 dollars per year
(2’000 per month).
(assuming 30 years of savings, 7% investment return and 3% inflation p.a.)
7) If your baby is born today and you would like to finance your child’s education, savings of approx. 125’000 dollars are required at the time the child starts college.
(based on today’s average 4 year public college costs of 12,841 p.a., inflated by 5% p.a., start at age 19)
8) If you start with your savings plan for the college costs at your baby’s
birth, you need to save approx. 3’600 dollars a year (300 per month).
(assuming 7% investment return p.a.)
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