The principle here is that each of us should build a retirement nestegg over and above state, employee or private pensions, and in addition to any other sources of income like property or a business. You are to plot a savings/investment plan to retirement reflecting your own situation, likely rates of return in your country or in the currency you expect to save it.
1. Set a time horizon. Break into two parts if there is a major change such as children getting "off the payroll".
2. Choose an annual rate of return (and say whence you chose it).
3. Estimate average annual inflation going forward.
4. Set amount and currency you can or wish to invest each year. Escalate with inflation or your expected earning power. (Note "1" above_
5. Come to the total nestegg in the year of retirement.
What is the value of that future nestegg in today's currency (i.e. how has inflation eroded its purchasing power?)
The principle here is that each of us should build a retirement nestegg over and above state, employee or private pensions, and in addition to any other sources of income like property or a business.
You are to plot a savings/investment plan to retirement reflecting your own situation, likely rates of return in your country or in the currency you expect to save it.
1. Set a time horizon. Break into two parts if there is a major change such as children getting "off the payroll".
2. Choose an annual rate of return (and say whence you chose it).
3. Estimate average annual inflation going forward.
4. Set amount and currency you can or wish to invest each year. Escalate with inflation or your expected earning power. (Note "1" above_
5. Come to the total nestegg in the year of retirement.
What is the value of that future nestegg in today's currency (i.e. how has inflation eroded its purchasing power?)