The first step before calculating how much you should be saving to reach financial independence is getting comfortable with 3 incredibly large variables that are assumptions in the planning process that must be monitored:
- Tax Rate – what do we think our tax rate will be in the future?
- Inflation – what do we think inflation will be over the life of the plan?
- Rate of Return – what do we think our portfolio will return over the life of the plan? Maybe the more important question to ask is what rate of return will we need to make your plan work.
NIC NOTE: Anything we can do today to manage the impact of one of these 3 variables will increase the probability of the accuracy of the plan. Saving in Roth accounts (i.e. “All Things Roth’) Health Savings Accounts, and Cash Value Life Insurance can greatly reduce the impact of taxes in retirement.
Information in this material is for general information only and not intended as investment, tax, or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
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