Can I Retire Yet?: How to Make the Biggest Financial Decision of the Rest of Your Life by Darrow Kirkpatrick

Author:Darrow Kirkpatrick [Kirkpatrick, Darrow]
Language: eng
Format: epub
Publisher: StructureByDesign
Published: 2016-05-21T21:00:00+00:00

Then, with a basic understanding of retirement math and tools, you’ll be empowered to crunch your own numbers and draw your own conclusions about the state of your financial affairs.…

Understanding the Two Sides of the Retirement Equation

It’s enough to make even a number-loving engineer dizzy: savings, expenses, interest rates, investment returns, inflation rates, tax rates, safe withdrawal rates.…

What are we talking about? The retirement equation: the essential relationships between all the variables that determine how long your money will last into the future. Fortunes are made by calculating, prognosticating about, and manipulating this formula.

But, despite all the words uttered and pixels consumed on behalf of this equation, it actually boils down to a simple relationship that anybody can understand:

(Your Savings) x (Estimates About the Future) ==> Income for Future Expenses

Putting this into even plainer English: all of your savings – cash, investments, retirement accounts, annuities, pensions, Social Security – go into a pot at the time you retire. Then you, or a financial advisor, or an insurance company, apply some estimates or predictions about what will happen in the future to that pot.

Those predictions about the future determine the rate or multiplier to use for withdrawing from your savings. Based on that rate, you take from your savings pot some amount of income each month to pay your living expenses. In a nutshell, that’s the retirement equation.

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