Exploring Variables that Effect Retirement Plans

Statistics quantifying how many American households are saving for retirement are grim. There are families, however, that are trying to look out for their future selves by saving diligently for retirement. These families, the ones already convinced that they should save, still face the question of whether they are on track to successfully afford retirement. Let's consider this example:

The Millers are 40 years old and have saved $200,000. They are planning on saving $15,000 this year and continuing to do that annually, inflating the amount by 3% every year. At age 67 they plan on retiring. At that point, they would like to draw $50,000 annually (adjusted for inflation.) Note that this $50,000 does not include money that they might receive from social security or other pensions.

Is this a sound plan? If not, how can they alter their plan so that it is viable? In this example, we will use the Quantext Portfolio Planner to explore these questions for the fictitious couple, the Millers.

The scope of this example includes the variables:
  • Age at Retirement
  • Annual Savings Amount
  • Income in Retirement
We will briefly touch on the effect that asset allocation has on retirement plans, however, this will be covered in depth in a different example.

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