Hello, I am reading the 2nd edition of the Boglehead's Guide to Investing, and I'm struggling in the chapter "How much do you need to save" - so I know there are various online tools but I'd like a fundamental understanding of how the calculations are made and I'm having difficulty.
For instance, there's one chart titled "Five Years to Retirement" with values like this:
Five Years to Retirement
Required Income (current dollars)... $1000
Required Income (future dollars).... $1159
At 5% annual return, you will need ~ (per $1000)... $26,681
At 6% annual return, you will need ~ (per $1000)... $23,650
At 7% annual return, you will need ~ (per $1000)... $21,122
At 8% annual return, you will need ~ (per $1000)... $19,000
The text says in this case they are assuming annual inflation of 3% and 30 years retirement. I understand how 5 years at 3% inflation gets us from $1000 to $1159, but the rest has me confused.
Is this monthly income, or yearly?
What math calculations are happening to get the remaining values? The ones over $20K.
Does the "per $1000" imply that if the $1000 were monthly, they are saying this is the amount needed every month?
Do we not have to keep applying the 3% inflation to the required income every year for the 30 years?
For instance, there's one chart titled "Five Years to Retirement" with values like this:
Five Years to Retirement
Required Income (current dollars)... $1000
Required Income (future dollars).... $1159
At 5% annual return, you will need ~ (per $1000)... $26,681
At 6% annual return, you will need ~ (per $1000)... $23,650
At 7% annual return, you will need ~ (per $1000)... $21,122
At 8% annual return, you will need ~ (per $1000)... $19,000
The text says in this case they are assuming annual inflation of 3% and 30 years retirement. I understand how 5 years at 3% inflation gets us from $1000 to $1159, but the rest has me confused.
Is this monthly income, or yearly?
What math calculations are happening to get the remaining values? The ones over $20K.
Does the "per $1000" imply that if the $1000 were monthly, they are saying this is the amount needed every month?
Do we not have to keep applying the 3% inflation to the required income every year for the 30 years?
Statistics: Posted by cheryly279 — Thu Jun 13, 2024 5:00 pm — Replies 1 — Views 214