In this paper we are requested to make and evaluate a retirement savings plan. In this paper we were made several plans about retirement, with a final of finding out the amount we would need to save monthly to achieve a self-defined retirement savings goal. We began by figuring out to what extent we need to put something aside for retirement, by subtracting our age from our retirement age. This gave me 27 years to put something aside for retirement. At that point we went to figuring out the amount we have to spare. I chose to omit social security since it is an extremely unverifiable source of income later on. I do have a military pension that will pay roughly $2500 multi month. I currently live on about $5000 multi month, so with my military pension I will in any case require $25000 multi month to keep up my current living style without major changes. I based my savings plan on a yearly withdraw rate of 6% so I could never draw down my balance, and could live for an indefinite period without fear.
I decided that I would require $2,350,000.00 in my record before I could start making withdraws. Considering the savings plan from the discussion, I should save $1672.51 multi month for the following 27 years to agreeable retire at 60 years old.
Consider the possibility that I decided to hold up five more years to retire. Would this make the payments more reasonable?
How about we investigate what happens when we connect the new timeline to the savings plan.
Or
A = 833333.34 or the total amount that we need to save
PMT = the amount per month that we need to save
APR = .06 or 6% or the APR of our savings account
n = 12 or the number of payment periods per year
Y = 32 or the number we have to save
Monthly invested payment is $1,672.51
Just by giving ourselves five additional years we were able to lower our monthly payment to $1295.15.
Better yet imagine a scenario in which I could discover a record that would earn 2.1% premium. What might I need to spare every month? Would I be able to stand to return to my original retirement age of 60?
A = R2350000.00 or the total amount that we need to save
PMT = the amount per month that we need to save
APR = .021 or 2.1% or the APR of our savings account
n = 12 or the number of payment periods per year
Y = 27 or the number we have to save
Monthly invested payment is $1432.29
So by finding a better savings account with a 2.1% APR, we can reduce our monthly savings to $1432.29 and still retire at 60 years old.
What we see by these scenarios is that the main contributor to growth is time. You can reduce your regularly scheduled payments by finding better returns, however for true growth you require time. The earlier in life we start to consider our futures the more reasonable the cost of financing them.
References:
Bennett, Jeffrey and Briggs, William (2011). Using and Understanding Mathematics: A Quantitative Reasoning Approach (6th Edition), and the Pearson MyMathLab Student Access Kit.
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SavingforRetirement1.docx
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