Originally Posted by
JMT21
I couldn't agree more with what your saying. Putting money away while your young and living below your means is key. I think your numbers are a little off though:
$500/month for 35 years at 12% is $3.2 million as you say. Discounted back to present value assuming 4% inflation per year is $815,000. Assuming you live until 95, your retirement income will be nearly $400,000/year (thats in todays dollar and would be significantly less adjusted for inflation).
Originally Posted by
JMT21
I feel like such a nerd for even debating this...
I'm assuming your using a financial calculator where:
FV=$3.2 million
PMT=0
I/Y=4%
N=35
I compute a PV of about $811k. Perhaps you're using a different method?
Just out of curiosity, when you're performing your financial planning, how many years are you planning on drawing retirement funds?
your telling me! I think i need a pocket protector! Anywho, you can't just take the present value of the result of the inflation free calculation. You have to run the savings calculation/amortization with the inflation assumed along the life of the saving plan. there are several online saving calculators that allow you to do this by letting you select the inflation rate. However, the easiest thing to do is just use 8% return instead of twelve. it may also be that the value of the monthly deposit is increased with inflation as well.
As far as how many years i plan on drawing funds, the answer is forever. I won't touch the principal so the interest springs eternal.
