annual return over the course of his career, what can joe expect at retirement?

Joe expects a 5% each year in the mutual fund If the mutual fund will average 7% annual return over the course of his career then his total earnings from mutual fundsequals 7% of 10% of his salary = (7/100)* (10/100)* (60000 [1+5/100]^30) So,Joe expect at retirement is

Full Answer

What is annualized return?

Annualized return, also called annual return or annualized total return, is the geometric average of an investment's earnings in a year. This formula determines the return rate on the principle that has been invested and does not account for any available cash or committed cash.

How to calculate annualized return?

To accurately calculate the annualized return, you will first have to determine the overall return of an investment. The formula for the overall return is (ending value - beginning value) / beginning value. In this formula, the beginning value is what your portfolio was worth when you invested, or how much you put into an investment.

How to determine how effective an investment has been?

Using the information derived from the annualized return formula , an investor can then determine how effective an investment has been by comparing their return to that of similar investments.

What is the principle of annualized performance?

The primary principle that must be abided by is that an investment cannot report its performance to be annualized if it has not been in existence for less than one year. So, for example, if a fund has been in operation for only two months and has earned 6%, it cannot report an annualized performance of 48%. This principle is meant ...

How to calculate total return rate?

To calculate the total return rate (which is needed to calculate the annualized return), the investor will perform the following formula: (ending value - beginning value) / beginning value, or (5000 - 2000) / 2000 = 1.5. This gives the investor a total return rate of 1.5.

Is annualized return the same as average return?

While an annualized return and an average return may seem similar at first, there are key differences between these two calculations. Understanding these differences and the benefits of these two calculations can help you decide which formula to use when analyzing your investments.

Why is a retired man looking forward to retirement?

He is looking forward to retirement because he wants to pursue a hobby or some kind of pet project. But when he retires, he finds that he is not very good at it. It’s difficult. I encourage my clients to take classes, take lessons and brush up on their skills [while they’re still working].”.

How many Americans are engaged in post retirement?

Research conducted by the consultancy Penn Schoen Berland, on behalf of Encore.org and the MetLife Foundation, suggests that as many as nine million Americans aged 44-70 are engaged in post-retirement careers, and another 31 million Americans want to pursue an encore career.

What is the happiest thing to do in retirement?

Research indicates that those who are happiest in retirement tend to answer that question by “giving back” and discovering a sense of purpose. While giving back can mean boosting charitable contributions, for a growing number of retirees it often comes in the form of a significant volunteer position or encore career, notes Friedman. “The most successful people in retirement look to use their talents and passions to make a contribution,” he says.

What to say when you retire?

You’re excited about retirement, right? You’ve worked hard for, what, four or five decades now? You’re due. No more early alarm. No more meetings. No more deadlines. No more office politics. Can you believe it? It’s just you — out on the links; puttering in the garden; taking care of your grand kids. It’s going to be great.

How long can you live after retiring from Social Security?

As people lead longer and healthier lives, a person retiring from full-time work at the age of 65 today will likely live another 20 to 30 years. That time horizon is daunting for many people, says Kevin Reardon, owner and president of Shakespeare Wealth Management in Pewaukee, Wisconsin. “There’s often a combination of excitement and anxiety as people approach retirement,” he says. “The excitement comes from having more free time, but the anxiety comes from figuring out how much can I afford to spend? And what will I do with all that time?”

Do people need a financial plan for retirement?

In other words, people approaching retirement need to have a financial plan, but they also must have a plan to stay engaged and productive. “Your psychic value and your economic value are correlated in our society, so find ways to protect both leading up to retirement,” says Geczy. “Aging well and aging gracefully are part of the goal.”

Can I retire part time?

If you still need time to figure out how you want to spend your retirement – or, indeed, you still need the paycheck — consider a phased retirement, which involves working a part-time schedule while beginning to draw benefits. Many companies, including Intel and Cigna, have programs that allow older employees to scale back on a contract or freelance basis, notes Wharton’s Cappelli. “The [workers] have the same status and they pretty much work in the same groups they did before, but they do not supervise other employees and they have no administrative responsibilities,” he says.

What was the worst case scenario for saving?

The worst case 35-years-of-saving scenario (suffered by people who retired in 1920) occurred when savers averaged just over 1% annually for 35 years and accumulated about $231,000. And note that people who retired in 1921 or 1981 fared almost as poorly.

How to adjust 9% nominal return?

To adjust the 9% or 10% nominal return for the 3% inflation, you subtract the 3% from the 9% or 10%.

What is nominal return?

A first quick error common to new investors: Using a nominal return—which is a return that hasn’t been adjusted for inflation.