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View Full Version : CI x {55 - (A/3) - (RA/7)} = happy retirement


Dyl Ulenspiegel
08-06-2005, 12:01:19
http://money.guardian.co.uk/pensions/story/0,6453,1501734,00.html


Funny formula. So if you're in your mid30s, looking to retire at 65, you'd need 35 times your current income....

Which means that at 5 % interest, you'd have to save about half your income for retirement...

:nervous:

Rodgers
08-06-2005, 12:03:14
I'll just work until I'm 80 (my life expectancy - probably), enjoy the free drinks at my retirement party and then shoot myself at my desk.

Cruddy
08-06-2005, 12:04:19
Alternatively, pull a bank heist on the last day of your employment.

No lose situation - if you're caught you get looked after for the rest of your life, if you get away with it you've saved yourself a whole lot of saving.

Funko
08-06-2005, 12:05:05
Funny? :hmm:

Is there anything wrong with it though - other than assuming that you need the same income when you are 65, you might well have paid off your mortgage etc by then.

Rodgers
08-06-2005, 12:07:02
No one in this generation will retire at 65 - we'll be working until 70.

Funko
08-06-2005, 12:08:48
At least.

Funko
08-06-2005, 12:09:11
Hmm. Lottery ticket, the sensible alternative.

Dyl Ulenspiegel
08-06-2005, 12:10:14
I suppose the formula assumes no pension or other income. If you have paid off a mortgage, you have the housing "service" as a capital income from your home.

Funko
08-06-2005, 12:13:18
The formula is to work out how much you need in your "pension pot" which means the value of all your pensions, other investments including property etc.

What I meant about the mortgage being paid off was not just that you had the value of the house in your pot if you wanted to buy a smaller place to free up equity etc but that often the mortgage can be a significant amount of your monthly outgoings...

Dyl Ulenspiegel
08-06-2005, 12:16:03
That's only a matter of how you count the capital service from your home: as a reduction of expenses, or additional income.

Another funny calculation: if you own 3.5 times your CI at age 35, the required savings rate drops from 50 to 30 %.

Funko
08-06-2005, 12:25:12
Yes, true.

This formula is definitely interesting because it's come up with an amount for my 'pension pool' of more than double the largest amount I was looking at when I was working this shit out the other month. That method I understood, it had more different variables but was a bit clearer what was going on and why.

This formula I don't understand even in principle. Where do the values come from? Why is it Age/3 and retirement age/5? What is 55?

mr.G
08-06-2005, 12:25:28
I don't work at all
just busy with my payed hobby

you are alllllll verliezers

Drekkus
08-06-2005, 12:28:03
The babyboomers have lived to large, letting the generations thereafter with the bill.

Funko
08-06-2005, 12:31:16
Or... if I do the formula again properly, it comes up with roughly the same as the high estimate of what I was looking at before. :o

Dyl Ulenspiegel
08-06-2005, 12:35:03
Originally posted by Funko
This formula is definitely interesting because it's come up with an amount for my 'pension pool' of more than double the largest amount I was looking at when I was working this shit out the other month.

Assuming that CI increases 150 % until pension, and I want a 100 % replacement rate with capital consumption and 5 % interest for 20 years, I get about 32 times CI under my normal method. So it's roughly correct.

Dyl Ulenspiegel
08-06-2005, 12:39:50
Originally posted by Funko
This formula I don't understand even in principle. Where do the values come from? Why is it Age/3 and retirement age/5? What is 55?

I guess it's just the result of a mathematical approximation towards the exact formula.

MDA
08-06-2005, 12:44:47
Ug. I'm only saving 7% (and getting partial matching funds from work).

Tizzy
08-06-2005, 12:46:52
I definitely need to save more. Later in the year I'll be able to afford to :beer:

Beta1
08-06-2005, 13:02:01
according to that I'll need 37 times my current salary!!!

Like thats going to happen. Good job I've a nice final salary scheme.

I guess the other thing about that is that its total pension pot not amount from now on so if you've already got half of it when your 45 then you dont need to save that bit again.

Dyl Ulenspiegel
08-06-2005, 13:19:34
A calculation in absolute figures: saving 200 a month from 25-65 at 5-7 % interest yields 300k-500k , which is good for roughly a 2000-3000 pension.

I rely on another 200 savings plan, real estate - and the remains of the state pension system.

Funko
08-06-2005, 13:55:29
Originally posted by Dyl Ulenspiegel
I guess it's just the result of a mathematical approximation towards the exact formula.

Yeah, and it does give you order of magnitude. :)

Drekkus
08-06-2005, 14:19:27
Originally posted by Dyl Ulenspiegel
A calculation in absolute figures: saving 200 a month from 25-65 at 5-7 % interest yields 300k-500k , which is good for roughly a 2000-3000 pension.

I rely on another 200 savings plan, real estate - and the remains of the state pension system. 5-7%, is that including inflation? Otherwise 7-9% yield per year is pretty steep.

Dyl Ulenspiegel
08-06-2005, 14:33:17
"is that including inflation?"

Yes, all nominal figures.

Drekkus
08-06-2005, 14:34:47
how do you manage 7-9% yield per year??

Dyl Ulenspiegel
08-06-2005, 14:43:17
5-7 % is the nomimal yield I look for.

Drekkus
08-06-2005, 15:01:34
measured over 30 years, or every year?

Dyl Ulenspiegel
08-06-2005, 15:04:53
??

5-7 % nominal annual yield (ie, NOT inflation-adjusted, BUT per year), over 40 years.

Drekkus
08-06-2005, 15:18:58
So do you invest in stock? How do you make sure to get a 5-7% annual yield without taking too many risks?

Dyl Ulenspiegel
08-06-2005, 15:53:17
5-6 % is for government bonds; the current 4 % is an extreme low.

Venom
08-06-2005, 16:02:08
I'm going on a killing spree at 70. If I live that long. I'll make the cops bring me down in a hail of gunfire. Then there will be a TV movie about me and my spree. Or whatever they'll have 50 years from now in place of TV. Probably mind beaming.

Japher
08-06-2005, 16:04:27
A TV movie about an old dude on a killing spree? Probably take out the guy who drives the old person shuttle, trip over your walker, and throw out your hip

it'll be a comedy I guess

mr.G
08-06-2005, 16:16:43
Originally posted by Venom
I'm going on a killing spree at 70. If I live that long. I'll make the cops bring me down in a hail of gunfire. Then there will be a TV movie about me and my spree. Or whatever they'll have 50 years from now in place of TV. Probably mind beaming. It's gonna be the first oscar evah for a fat actor, the grandson of John Candy

Funko
08-06-2005, 16:22:35
It'll be appropriate that someone called Candy plays Venom.

Venom
08-06-2005, 16:29:15
Middlename Cheesesteak.

Japher
08-06-2005, 16:41:07
Cheesecake Candy

MOBIUS
09-06-2005, 15:33:55
Well I've temporarily retired now...:cute: