 |
Saving For Retirement
How can you tell if you're on track, saving enough money to support your current lifestyle when you reach retirement? Here is a formula provided by Albion Management Group.
- Take your current annual pretax earnings
- Multiply it by your age
- Divide by ten
If your net worth (net worth equals "what you own" minus "what you owe") is substantially greater that this figure, you're in reasonable shape. If your net worth is substantially less than this figure, you may be well-advised to adjust something.
For example:
Bill and Mary earn, pretax, $50,000 per year.
They are 40 years old.
Therefore, their net worth should be:
($50,000 x 40) / 10 = $200,000
Bill and Mary have the following assets:
- House............$150,000
- Bank Account......$10,000
- Bill's 401K.......$50,000
- Mary's 401K.......$70,000
- Other property....$10,000
Total Assets.........$290,000
Bill and Mary have the following debts:
- Mortgage..........$80,000
- Credit Cards.......$3,000
Total Debt............$83,000
Bill and Mary's net worth is $207,000.
This tells Bill and Mary that they are on track, but they do not have a large cushion should their financial assets experience poor performance.
|
|
