![]() ![]() This exercise will again consist of taking numerous variables: Now that we know we need a nest egg of $650,000 at age 65 to maintain this lifestyle until age 95, we can once again use some Reverse Engineering to work out how much we need to save/invest each year. Reverse Engineering how much you need to save each year Therefore factoring his tax rate this would bring his required Retirement Nest Egg or Magic Number at 65 to $650,000. We could then make an assumption for the client's average tax (say 20% for this example). With these variables, we can work backwards and using some math, figure out that at 65, this client would need around $520,000, ignoring taxes.įuture taxes depend on what type of investments their portfolio is in (RRSP, TFSA, non-registered) and the type of income they will earn. Income/Pension/Government Benefits in Retirement: $30,000/year (after tax) Lifestyle Costs in Retirement: $60,000/year Let's start by setting a few general variables: Taking an engineering approach to financial planning has naturally led me to view retirement as an exercise in reverse engineering. Reverse Engineering the Amount you Need for Retirement How much will you want to travel? What type of hobbies would you like to do? This of course depends on what type of lifestyle you would like to live. We did this with motor vehicles, lawnmowers, household appliances, and one time, even a casket! First step: Determining your lifestyle costs in retirementīefore we even start trying to reverse engineer your retirement, we need to first make an estimation of your lifestyle expenses. Reverse Engineering of a product was one of the methods we used, and consisted of tearing apart a finished product to study its parts, design, and overall efficiency. Orders placed by other means will have additional transaction costs.During my 15 year career as an engineer, my colleagues and I conducted numerous VA/VE (Value Analysis/Value Engineering) type projects to help our clients reduce costs and improve designs. Spreads, Straddles, and other multiple-leg option orders placed online will incur $0.65 fees per contract on each leg. Prior to trading options, you should carefully read Characteristics and Risks of Standardized Options. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. ![]() Trading foreign exchange on margin carries a high level of risk, as well as its own unique risk factors. Clients must consider all relevant risk factors, including their own personal financial situation, before trading. Trading stocks, options, futures and forex involves speculation, and the risk of loss can be substantial. Past performance of a security or strategy is no guarantee of future results or investing success. Market volatility, volume and system availability may delay account access and trade executions. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union. Do Not Sell or Share My Personal Information
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