PREPARING FOR A WONDERFUL RETIREMENTBy Courtney CourterEmail me at [email protected]
OVERVIEW
FACTORS TO CONSIDER At what age do you start your new career? How many years will you work until retirement? What average inflation rate do you expect over
your working career? What savings rate do you expect to get on your
money saved? How many years beyond retirement do you
expect to live? What is your starting salary equivalent value at
the time of your retirement? How much do you have to save annually (until
retirement) such that the amount saved at the time of retirement will provide an annuity for the number of years you expect to live beyond retirement (at which time the amount saved is drawn down to zero)?
AT WHAT AGE WILL I START MY CAREER ?
Career: Pediatrician
Source: http://www.ruralmedicaleducation.org/age_divisions.htm
AT WHAT AGE WILL I RETIRE Average Retirement of physician: >50 I hope to retire at age 66
Source:http://pediatrics.aappublications.org/cgi/content/abstract/125/1/158
WORKING YEARS
CONSIDER
Sources:Inflation - Savings rate - Life Expectancy -
Stating Salary
MINIMUM AMOUNT YOU ARE WILLING TO RETIRE ONSalary equivalent = (Starting Salary)*(1 +
i)n
“i” = inflation rate
“n” = number of years until retirement.(target annual retirement income)
(100,000)*(1 + 0.0215)39 = $229,243.20
CALCULATING FUTURE VALUE
“pymnt” = amount you save each year (the same amount for each year) “i” = interest rate you expect to get for your money over the entire saving
period (your career)“n” = the number of years you will work
FV pymnt *1 i n 1
i
(229,243.20)*((1 + 0.055)39 – 1 / 0.055)
=29,466,033.09Source: Rate
CALCULATING ANNUITY
“FV” = Future value “i” = interest rate you expect to get for your
money over the entire saving period (your career)
“k” = the number of years you expect to live beyond 70
Annuity FV * i1 1 i k
29,466,033.09*((0.055)/(1-(1+0.055)) -14 )
=$120,141.80
RESULTS – SALARY AND SAVINGS
The sooner you start saving the less you will need to save to meet your annuity. If you
wait long you will need to save much more
RESULTS – PERCENT SAVINGS
The percent of your salary you need to save increases the longer you wait to start saving
WHY IS IT SO IMPORTANT TO START SAVING NOW ?You want to make the most of your
retirement If you save early you will have money
to travel when you retireYou will have money to go out to eat
and vacation
MAINTAIN STABILITY
SOURCES http://www.ruralmedicaleducation.org/
age_divisions.htm https://pooledmoneyinvestmentboard.com/
Monthly_Rate_Comparison.pdf http://www.westegg.com/inflation/ http://www.bankrate.com/calculators.aspx http://en.wikipedia.org/wiki/
List_of_countries_by_life_expectancy http://pediatrics.about.com/cs/
pediatriccareers/a/pedi_interview_2.htm http://pediatrics.aappublications.org/cgi/
content/abstract/125/1/158