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Other

Government

3%

Assistance

42%

WHERE DO YOU WANT YOUR MONEY TO TAKE YOU TODAY?

Wages 15%

289

Pensions 20%

Income- Producing Assets 20%

Figure 14.1 This illustration represents the different sources of retire- ment income. Notice how government assistance makes up the biggest portion right now. In years to come, we’ll see a change in the overall per- centages, as income-producing assets begin to make up a larger portion.

But, how much do they need to save on an annual basis to reach their goal? Jeff and Mary have decided that they don’t want to count on a 10-percent return. Rather, they would like to decrease that to 8 percent. Using an interest factor of 14.4872 (for 10 years at 8 per- cent), we see that Jeff and Mary will need to save $64,094 per year ($928,530 ÷ 14.487).(See Table 14.1)

WHERE TO INVEST?

The easiest part has been done. We’ve figured out how much is needed to cover the shortfall for Jeff’s and Mary’s retirement. But now they are faced with the hardest part: saving the money. As we discuss in Chapter 3, saving money is the hardest part to becoming wealthy. But it’s the most vital part of retirement planning. Although knowing how much money you should be saving is an important component of retirement planning, actually saving the money is the most important. So if you are unsure of how much money you should be putting away, don’t let that deter you from starting.

2 Interest factor from Personal Financial Planning, Eighth Edition, by Lawrence J. Gitman and Michael D. Joehnk. Harcourt Brace College Publishers, 1999.

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