WEALTH & RETIREMENT
15 % minimum rule
Global investment management firm T . Rowe Price said that contributing as much as one can as early as possible will assist in reaching retirement savings goals .
The firm recommends that you aim to save at least 15 % of your income annually . They further suggest that by the time you are :
• 45 years old : should have saved up to three times your salary .
• 55 years old : 7 times your salary saved .
• 65 years old : saved as much as 11 times your pre retirement salary
“ Reaching this goal will require a savings rate of around 15 % over the course of your working career ,” said Judith Ward , certified financial planner at T . Rowe Price .
How to mitigate the effects of inflation
“ Most retirement funds have investment strategies that aim to grow savings by more than inflation , for example , 4 % – 5 % real returns over long periods ( 30 – 40 years ),” said Lange of Alexforbes Research .
Suppose investment growth manages to meet or exceed its objective . In that case , inflation is generally not a concern as the actual value of savings is being maintained , and a reasonable amount of growth is achieved over the long-term , said Lange . She stressed that the higher the inflation , the more challenging it is for investment growth to meet real returns , especially over short periods .
In addition , there is an inverse relationship between bond yields and the cost of a pension . The higher the bond yields , the lower the cost of purchasing an annuity from an insurer ; this can be an advantage for someone retiring .
Note : This article first appeared on the BusinessTech website . Click here to view the original article
190 OCT 2022 SA Real Estate Investor Magazine