Retirement Planning

Retirement Planning

Name

Institution

Tutor

Course

Date

Retirement Planning

A “number” is that amount of money you expect to earn after a retirement. My number will not just be randomly picked out but I will calculate by multiplying the income I spend from what I earn to a range between 20 and 50. This will help me set achievable goals.

Thus “number”= annual expenses * range (25)

= $8,500*25

=$255,000

I used the number 25 because it is a safe amount and gives me a 4% withdrawal rate.

My number can go higher when I increase the number of expenses in my budget on a yearly basis. When my needs and expenses keep increasing in a yearly basis then my number will automatically increase. Having a salary that may go down or a salary with a small income tax then it will lead to a tax bracket that is very low, causing my number to go high. A lot of money in retirement plan can have my salary and taxes on my salary increase leading to higher number on retirement savings (Brigham & Ehrhardt, 2013).

I would need an annual return between 7% to 8%. This range is safe for my retirement planning decision. When an inflation hits or other external factors on the investment, a safe withdrawal rate of not less than 4% will always be achievable. Higher expectations of more than 8% can be good for my investment but the higher chances of it not being able to materialize might lead to a very risky loss to my long term savings.

There will be cases where the investment will encounter problems such as inflation or other unexpected problem, thus it is essential to be very conservative and take on investments I can control the rate of the savings from the investment. The range between 7% to 8% might get me a 20% or more rate of return on good days depending on the markets and a -13% on the bad days. Thus this gives me the opportunity to concentrate on the customer’s rate of savings.

An increase in my return can help me achieve my numbers his is because an increase in return by just a percentage can get me achieve my long term goal. Thus it is very essential for me to invest in something people are willing to buy. There is need for knowledge on how and why the investment is adding more value and giving me money in the bank account. This will help me analyze and see which ones I can invest in and which ones I can sell because they do not bring in any profits. Ideally, when the demand of the security of the investment increases at a certain time frame then there will be a realized gain in the investment, thus more money in the account.

I can also achieve this by keeping myself in the loop in the market. This means that the performance of my investment account should reconcile and agree with the stocks gauged in the market. I can also go ahead and buy an index fund and put a certain investment in the indexes. These index funds are usually affordable where paying more money for the management gets me an opportunity to get some share of my investment back.

Over the years, the economy and financial world has evolved in that technology has taken over and computers are used to analyze and check on the stock market (Lusardi et al , 2014). Having such knowledge at my disposal will expose me to the historical returns all through history and thus giving me a strategy and expected average rate of return and enable me invest with caution and have achievable expectations.

References

Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage

Learning.

Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory

and evidence. Journal of Economic Literature, 52(1), 5-44.