Free Ebook.

Enter your email address:

Delivered by FeedBurner

« A Dozen Creative Donations, Part 3 | Main | Kidding Around: A Capital Gains Idea »

December 14, 2005


Feed You can follow this conversation by subscribing to the comment feed for this post.

This is a good argument for the value of a financial planner. I work with a local firm that was able to lay out several scenarios, taking into account family planning, inflation, earning potential and saving expectations. What I realized is that there are numbers (rather than a single number) and variables at play, but either way you slice it, setting a goal gives you a way to visualize what happens when you alter the plan, such as early retirement or a different tolerance for risk in investments.

Like most things, one should trust but verify. I think for most people with more than 100k of assets in the marketplace they benefit from financial planning. It helps give definition to the number.

You don't need a planner eating away at your hard earned assets with an annual fee, unless your financial picture is terribly complicated or you have a complex problem. All you need is some financial sense and a spreadsheet program.

I'm 28 currently, my magic number is right around $5,000,000, assuming I want to live on $75k/year in retirement and retire at 60. Got a ways to go.

Perhaps you should get a financial planner then. Assets of $5M should securely provide $200K of income or $1.9M would be sufficient for $75K. Or is that $5M in inflated future dollars?

His number is right around where mine is. If I'm right (at least this is how I do it...) he's calculating how much he needs in absolute dollars (nominal) to live on $75,000/yr in real money ($75k in today's purchasing power) AND at the same time not draw down on his pricipal balance.

Assume inflation of 2.75% annually (1.0275^32 = 2.4) means that $5MM is worth only $2.1MM in today's dollars. At that point assume you put it into a safe mix of stocks and bonds (75/25 maybe) so you assume a 6.5% return. With a 2.75% inflation rate that lets you remove about 3.75% of your total each year to maintain your principal... that gives you right about $75M per year in real purchasing power. Fun fun.

That's at least the idea behind what I'd like to do. Wosrt case scenario you have an extra $5MM to fall back on and that's not taking into account social security since we aren't going to see a dime of it anyway. This also means you'll be leaving your entire amount to your kids.

I have my magic number. Shh don't tell anyone what it is ;-). The challenge is getting to it as quick as I can.

Leave it for your kids?!!?? I say split the difference between 1.9 and 5, you'll have about 100 because 75 won't cut it in 30 years. Pay for your kids school and weddings, maybe, just maybe a small downpayment on their first house and say good luck!

These are good comments. Big question none of us can answer (hence all the assumptions above) is what the spending value of a dollar will be when we retire. Work in process.

The comments to this entry are closed.

Start a Blog


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.