| Using this simple retirement calculator could be | | | | them). |
| your ticket to financial freedom! | | | | Therefore the balance of 70% of your living |
| The earlier you start considering retirement | | | | expenses will be drawn from your retirement |
| planning the better - even though this might just | | | | savings. |
| seem like motherly concern to take a jersey | | | | So, for how long will your 10% savings for 30 |
| when you go out on a lovely day... just a bit over | | | | years last? A not very long 9 years. |
| protective and not really necessary. | | | | Now here's the exciting thing about compounding - |
| However it will turn out to be wise advice... the | | | | if you save, on the same basis as above, for 40 |
| earlier you start the better off you'll be. | | | | years (instead of 30 years) your retirement |
| Obviously, when you're young, your retirement | | | | money will last for 19 years. |
| planning priorities are quite different from when | | | | In other words, the first 30 years of saving buys |
| you get older but whatever your age your | | | | 9 years of retirement and the last 10 years of |
| retirement success is based on two rules: | | | | saving buys 10 years of retirement. |
| Rule 1: Never touch your retirement savings. | | | | The power of compounding in the simple |
| Rule 2: Never forget Rule 1. | | | | retirement calculator! |
| These rules are absolutely critical to the | | | | Scenario 2 |
| successful outcome of your financial retirement | | | | We now look at the same salary, increase, and |
| planning. The benefit of compounding is very | | | | inflation assumptions as above but increase the |
| dependent on time which is very clearly shown in | | | | savings rate to 15%. |
| the following examples of the simple retirement | | | | After 30 years of saving your pension will last for |
| calculator. | | | | 16 years and after 40 years of saving, will last |
| Scenario 1 | | | | for 37 years! |
| Assume a starting salary of 100 000 per annum, | | | | Conclusion: It is only after saving 15% of all your |
| an annual increase of 4% and yearly inflation of | | | | earnings for 40 years and getting a return of 4% |
| 4%. (These assumptions may seem a bit | | | | above inflation that you will be able to look |
| unreasonable but all we want at this time is an | | | | forward to a reasonably comfortable financial |
| appreciation of the simple retirement calculator). | | | | retirement. |
| If you save 10% of all your earnings for 30 years | | | | In looking at the above scenarios there are |
| and earn a return of 4% above inflation you will | | | | obviously a number of variables that can be |
| have 1.7 million when you retire (which however, | | | | changed. But initially it's important just to |
| will only be worth 530 000 in today's terms!). | | | | understand the principles of this simple retirement |
| Next, let's assume that your after retirement | | | | calculator: |
| living expenses are the same as your final salary | | | | Start saving for your retirement sooner rather |
| and that 30% of your living expenses will be | | | | than later and never touch these savings. |
| covered by social security (a valid assumption | | | | Simply put, for a successful retirement save at |
| only in those countries fortunate enough to have | | | | least 15% of all your earnings for 40 years! |