Have you ever wondered how much money you should be investing to insure you have enough at retirement? I have been in a course for three years now called the Aji Network and they talk a lot about this. A paper they released is very helpful for your calculations to how much capital (money invested) is needed to produce $100,000 a year in today’s dollars.
First let me give you some assumptions that were made in arriving at this point:
3% Inflation – the historical average (avg. increase in the costs of goods and services)
8% Return on Investments – historical average if passive investing (putting money in market and leaving it)
4% Annual Withdrawals from Principle – this is given as the maximum rate of withdrawal as to decrease the likelihood that you will run out of money before you die (this is determined based upon the Monte Carlo calculations that take into account stock market volatility)
Here are the figures:
Age - 30
Years to Work until 62 - 32
$100k income at retirement - $257,508
Capital-at-Work needed to be on track today - $264,326
Capital-at-Work needed at 62 - $6,437,707
Minimum Annual Payments if started today - $47,966
If interested in looking closer, check it out the chart on their website.
If you think you can live on less than $100,000 after taxes you can cut the above numbers in half. Either way, it creates the need for some action and certainly a strategy and most likely a strategy different than the one you have. Now is the time to build the strategy and to do that you must begin to build relationships with those further down the road than you are.
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