Retirement
Sample results

The result for the necessary z prop given by (Ret-03) depends critically on the assumptions made. As an example, one might assume that price inflation will be 3.5% per year forever and that one's pay will increase only at that same rate of 3.5%. If a 4.5% per year nominal rate of interest is assumed, then (using 1.045/1.035 in real terms) pre-retirement and post-retirement net interest rates will remain the same, i rel to pay = 0.966 percent per year and i real = 0.966 percent per year. These assumptions may be reasonable in view of the market returns available on inflation-indexed bonds, after expenses and any tax. Equation (Ret-03) is readily coded in Excel and with these assumptions gives the required savings rates in the accompanying picture.
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