The Wealth Formula is easy to understand.It's a straightforward way to understand the impact inflation and taxes can have on your savings as you prepare for your financial future.
The Wealth Formula:
+/– Rate of Return
It illustrates how:
- Interest rates can go up or down
- The value of the money you save today may be worth less tomorrow
- Taxes can reduce your overall savings
* WFGInsuranceQuotes.com does not offer tax and/or legal advice. Please consult with your tax and/or legal professional for further guidance.
** This is a concept/goal developed for illustrative purposes only. The term 'wealth' is subjective and must be defined on an individual basis.
Here's Why: Let’s say you’re 25 and your retirement goal is to have $1 million saved by the time you’re 65.
If you start saving $655.30 per month, you’ll reach your goal in 40 years. But if you wait until you’re 45, you’ll have to save $2,432.89 per month, which is a lot of money when you may have a family and a mortgage. If you only had 10 years to save, your monthly savings amount would need to be $6,439.88.
With only 5 years, contributions would need to be $14,704.57 per month. That’s assuming that the money saved in all four of these scenarios are based on a monthly compounded rate of return in a hypothetical 5 percent tax-deferred account.