Savings for Retirement
Overview
Once a
target retirement wealth
has been calculated, the next step is to make a plan for how to achieve that level of
wealth from savings during a workers working life.
There are complexities to calculating how much a worker should save. The primary issue is forecasting the rate
of return she will earn on her savings. The effects of compounding can drastically alter the final amount of wealth
due to small fluctuations in the rate of return, especially early in the workers savings schedule.
The workers salary is also unpredictable. Although typically one can assume that a workers salary will not go down
over time, the worker could become disabled or lose their job.
Topics
