How much you need to retire: Stellenbosch University devises a new formula
There is a new approach to calculating how much you should save towards retirement.
Professor Johann de Villiers and Elze-Mari Roux (Stellenbosch University Department of Business Management) recently published a study in the Journal of Financial Counseling and Planning which suggests investors should focus on present income and consumption rather than on their future needs.
Roux and De Villiers developed a formula to calculate the percentage of income a client can consume now while saving what’s left for retirement.
Abongile Nzelenzele interviewed Roux.
It’s very difficult for people to imagine themselves far in the future… We say let’s calculate what you can spend now so that, if you save everything else, you have enough to retire… Instead about talking about the future, we talk about now…Elze-Mari Roux, Department of Business Management - Stellenbosch University
We just need to know how long to retirement and how much you have saved up…Elze-Mari Roux, Department of Business Management - Stellenbosch University
There’s this idea that saving 15% of your salary is a good amount… It’s only true for someone in their 20s. If you’re in your 40s without having contributed, it’s not going to be enough…Elze-Mari Roux, Department of Business Management - Stellenbosch University
People worry about not having enough… It’s not a complicated calculation…Elze-Mari Roux, Department of Business Management - Stellenbosch University
For more detail, listen to the interview in the audio below.
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