Our old age promises to be long, we are living longer, and we want to retire early. This can be a paradox… retirement time can be longer than the time we spend working. We need good equity to support this which could be the longest phase of our lives.
Whenever a new year begins, it is tradition for us to make plans, promises, intentions, hopeful with the new times.
I take this opportunity to propose a goal for your 2022 planning: a gift from you to you, delivery date at 70 years of age, an allowance of R$1,000 for 30 years, until 100 years of age. Like the idea? So get to work.
As profitability does not depend on us, be conservative, think of a real interest rate, above inflation, and net, less costs and taxes. The other two, how much to invest and when to start doing it, are our decisions, each of us decides what to do to ensure a sustainable future. I can guarantee that the sooner we start saving for the future, the less effort will be.
I need to bring numbers to make this goal more tangible and help answer a question everyone should be thinking about: how much do I need to invest to “earn” a monthly income of R$1,000 for 30 years, from 70 to 100 years of age?
With the help of a financial calculator and using a net real interest rate of 2% per year, I identify that we need around R$270,000 to allow monthly withdrawals of R$1,000, until the capital runs out 30 years later.
The second question is: how much do I need to save every month to accumulate the R$270,000 at age 70?
Using the same interest premise, the answer depends on the accumulation time, that is, at what age we will start investing to achieve this goal.
Those who start saving at age 30 invest R$370 per month. As the accumulation time will be long, 40 years, he invests R$370 to have a future income of R$1,000! That’s right, it redeems almost three times the amount invested. What’s the magic? Time and interest!
Anyone starting at age 40 invests R$550 to withdraw about twice what they deposited, not bad! The accumulation and de-accumulation times are the same, 30 years.
Those who start at 50 make a greater effort, invest R$ 918, practically the same amount they will withdraw. Do you know why? Because the accumulation time will be less than the deaccumulation time.
Anyone starting at age 60, just ten years before the date on which the withdrawals will start to be made, will have a huge challenge ahead, invests around R$ 2,000 every month to withdraw half of what they deposited. You will probably regret not having started thinking about the future when you were still young…
To project larger withdrawals, of BRL 2,000 or BRL 3,000, for example, just multiply the numbers by 2 or 3. And remember that this is a simulation, considering net real interest of 2% per year throughout the time.
It will not be easy to sacrifice some of the immediate pleasure for a distant goal that is not yet perceived as necessary. But don’t forget the purpose: a gift from you, from you today, to you at 70 years old.
Happy New Year!
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I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
