Business & Finance homework help| Business & Finance homework help
To achieve an amount large enough to generate interest equal to 80% your income today, you’ll need to put away the equivalent of 12,5% your salary every month until you retire. Calculation based on 25x your salary at retirement and an assumed average return rate of 5%. For example, if your salary is $50,000 per year, you will need to save $1,250 a month to be able to retire with a lump-sum that generates interest equal to 80%.
This figure is conservative because it assumes that the rate of return will be fixed for many years. Inflationary pressures are also important to consider, as living expenses can often grow faster than wages. Individuals who want to secure their future financially during their working years should save as much money as possible early on so that they can build up a sizeable nest-egg by the time retirement comes.