You think my suggestion of limiting our lifespan crazy ? Let me give you some finger counting calculation:
Say, if you start working at the age of 20, retire at 60, has a lifespan of 80, and assume you wish to have HK$10000 each month to live on after retirement, how much money do you need to save ?
Let's further assume we always put our money on some kind of conservative investment and has a yearly yield of 2%. (You may consider the yield way too low - but that's 2% on top of the inflation rate, which generally would translate to a nominal yield of 5 to 6%.)
Where does our calculation end up ?
Well, we need $1.98 million at the age of 60, or roughly a monthly saving of $2700.
In other words, we need to chip in slightly more than one fourth of our desired monthly expenditure after retirement.
PS. A serious mathematician would point out that, for example, if the nominal yield is 6% and inflation rate 4%, you cannot simply use 2% (i.e. six minus four) as the actual yield for compound interest calculation. Nonetheless, the error is minimal in the range of figure in real life, and I shall stick to this imperfect and comprehensible estimation.
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1 comment:
Unfortunately, it is not always easy to achieve an average yearly yield, even in the long run, of 2% + inflation rate. It is even worse if you are investing on HKD/USD assets. So we need to chip in even more for our retirement.
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