How much is enough?

How much is enough?

“Six feet from his head to his heels was all he needed.”
Leo Tolstoy, “How much land does a man need?”

Between Tolstoy’s stark reminder of how many possessions we ultimately need, and the visions of getting fantastically rich that we all secretly harbour, is a simple question that we hear a lot from our clients – how much wealth should they accumulate so that they have a financially secure retirement? The answer to this tends to surprise people.

At a very simple level, you should have saved enough, and invested well enough for your investments to provide you with an income stream that is at least equal to your current expenditure.

Download this Banyan Tree Retirement Calculator, and see how you much you need to save and invest for a comfortable retirement.

However, slightly more complicated than the simple inflation adjusted income stream discussed above is the question of how much income is necessary to sustain your current lifestyle 20 years from now. Will the goods and services you consume in your retirement remain the same as they do today? Will their relative prices remain the same?

Here are the changes we noticed in our own consumption patterns since 1990:

Apart from the changes in the composition of the goods and services you consume, you will most likely also experience different rates of inflation for different goods and services. For example, as India develops rapidly, the cost of services, such as household help, or medical care, will most likely grow at a faster rate than the cost of manufactured goods.

It may be wise therefore to keep a margin of safety for your calculations, and provide for a little more than your current household expenditure for your retired life.

Do the amounts already seem daunting or impossible? Actually, with a bit of careful planning, you could achieve your retirement goals quite easily. Read more about How you can build wealth.

Happy Investing

Source:Banyantreeadvisors.com