Hi.. Great Question!
The biggest variable in this question is - ‘how much money you need on a monthly basis to be happy post 50?’ When you are getting that number, then do note that your expenses today may be very different from your expenses when you are 50.
Once you have that number then, everything else is easy because now you have a goal and can plan for it.
I assume by relax you mean financial independence.
The general rule of thumb in countries with Low inflation is 4/25 rule.
- multiply your monthly requirement by 12 and then by 25. You need this much cash by 50 so that you can withdraw the monthly amount and make sure your investment can last you 30 odd years.
So now you need a way to get that much amount by 50.
For that, use this formula below:
M = P × ({1 + in – 1} / i) × (1 + i).
In the above formula –
M is the amount you receive upon maturity (your target amount by 50 calculated above)
P is the amount you invest at regular intervals (this is to be calculated)
n is the number of payments you have made ( number of years to 50 X 12) — monthly payments
i is the periodic rate of interest.
If we assume 6% annual return, ‘i’ will be 0.005 (6/(12*100))
You can always play around with this percentage to get other number. 6% is balanced and achievable return. You can also try with 9-10% since S&P500 can give you that over a long term period.
So now you have an amount that you need to start investing monthly to have the desired amount by 50 that can take care of all your future expenses. Invest that money in your retirement portfolio and you are all set!
Also, make sure you have fun while you are at it!
Hi.. Great Question!
The biggest variable in this question is - ‘how much money you need on a monthly basis to be happy post 50?’ When you are getting that number, then do note that your expenses today may be very different from your expenses when you are 50.
Once you have that number then, everything else is easy because now you have a goal and can plan for it.
I assume by relax you mean financial independence.
The general rule of thumb in countries with Low inflation is 4/25 rule.
So now you need a way to get that much amount by 50.
For that, use this formula below:
M = P × ({1 + in – 1} / i) × (1 + i).
In the above formula –
M is the amount you receive upon maturity (your target amount by 50 calculated above)
P is the amount you invest at regular intervals (this is to be calculated)
n is the number of payments you have made ( number of years to 50 X 12) — monthly payments
i is the periodic rate of interest.
If we assume 6% annual return, ‘i’ will be 0.005 (6/(12*100))
You can always play around with this percentage to get other number. 6% is balanced and achievable return. You can also try with 9-10% since S&P500 can give you that over a long term period.
So now you have an amount that you need to start investing monthly to have the desired amount by 50 that can take care of all your future expenses. Invest that money in your retirement portfolio and you are all set!
Also, make sure you have fun while you are at it!