Interesting facts on retirement savings
Therefore, if you believed you could spend $ 50,000 a year when you retire you should be aiming for total financial assets of $ 600,000.
The sum you need to invest along the way depends on how soon you start and the rate of return you achieve.
For example, if a 21-yearold wanted to retire at 65 with an income of $ 3500 a week in today’s dollars, they would have to invest only $ 235 a month if the contributions were increased in line with inflation.
It’s a different matter for a person aged 40 as they don’t have time for compound interest to work its magic.
They would have to invest an indexed amount of $ 880 a month. That’s the effect of time.
The calculations above assume an inflation rate of three per cent and a net earning rate of nine per cent.
If the investor managed to achieve only inflation plus four per cent, the figures change dramatically.
The 21-year-old would have to invest an indexed $ 523 a month while the 40-year-old would have to invest $ 1471 a month. Fortunately, we still have a generous aged pension system.
If a couple had only $ 300,000 in financial assets in retirement they would be eligible for a combined aged pension of $ 26,416 a year.
This should be enough to make up the gap.
Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is n o e l . w h i t t a k e r @ w h i t t a k e r m a c n a u g h t . com. au.