Message Font: Serif | Sans-Serif

No. of Recommendations: 1
Hi everybody, I have a question I wish someone would help me with. It may even show you something that will allow you to retire sooner. My question is this, every time I read or asked retirement advisers how much I should save they say around \$1 Million. Most people when they hear this say that it is impossible for them to save that much and put all their hopes on winning the lottery. Last year my wife and I spent about \$32,000 on expenses. The S & P 500 has a 10 year load adjusted return of 8.12%. Likewise, the 10 year average inflation rate is 2.42%. I am using 10 year averages to mitigate the swings in the actual numbers. I want to set up my own annuity to pay expenses for retirement. Most annuities you buy take out a chunk of money for themselves. Although you can do the same thing with cash flows and NPV there is an easier way. I found this excel accounting equation by a genius named Timothy R. Mayes, Ph.D. for a graduate annuity which states:
=PV((1+B4)/(1+B3)-1,B5,-B2,0,0)/(1+B3)
You can copy and paste this equation into an excel spreadsheet and type the following numbers into the appropriate cells.
B2= Initial Cash Flow of \$32,000 ,
B3=The Growth or Inflation Rate of 2.42%,
B4=The Discount Rate or S&P 500 10 year load adjusted return of 8.12%.
B5= Years the annuity will pay you. Since most will want to retire at 67 to get full social security benefits and the average life expectancy for 65 year old man is 17 years and for women 20 years, so let’s use 20 years. This is based on National Center for Health Statistics. Furthermore, hate to be a bearer of bad news but, only 2% of people live past 90 years according to the U.S Census Bureau publication: 90+ in the United States.
Following is information you may want to consider.
S&P 500 Index
Performance Overview
Morningstar Return Rating: 4.00
Year-to-Date Return: 6.58%
5-Year Average Return: 4.85%
Number of Years Up: 29
Number of Years Down: 7
Best 1 Yr Total Return (1998-12-31): 28.62%
Worst 1 Yr Total Return (2008-12-31): -37.02%
Best 3-Yr Total Return (N/A): 14.24%
Worst 3-Yr Total Return (N/A): -14.60%

1-Year: 13.30%
3-Year: 13.33%
5-Year: 4.85%
10-Year: 8.12%

### Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!