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Kootenay Valley Financial Services. What do You Need?. GO. AL. What do You Have?. A$$ETS. Two Great Questions in Life. Principles for Long Term Investment Success. Asset class performance is ________________ over long time frames. PREDICTABLE. RANDOM.

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Kootenay valley financial services

Kootenay Valley Financial Services


Kootenay valley financial services

What do

You Need?

GO

AL

What do

You Have?

A$$ETS

Two Great Questions in Life


Kootenay valley financial services

Principles for Long Term Investment Success

Asset class performance is ________________

over long time frames.

PREDICTABLE

RANDOM

Mutual Funds are ____________ within asset classes.

EFFICIENT

Diversification is not always ____________ .

MORE

Investment expense are ________ important

than returns.

______________ asset classes based on volatility

enhances return.

COMBINING


Kootenay valley financial services

Taxes WILLalways go up, not down. ______ ______

To be financially SECURE income

must keep pace with inflation. ______ ______

Life expectancies AREgreater than

ever. ______ ______

Managed Equities ARE safer than

CD’s and Bonds. ______ ______

Risk is a necessary evil. ______ ______

What are Your CORE BELIEFS?

Yes No

X

X

X

X

X


Kootenay valley financial services

1.

3. _______________

2. _______

To achieve a consistent investment return –

You must avoid the BIG MISTAKE!

Investors typically have THREE types of Capital

Foundation

Speculative

Core


Kootenay valley financial services

The S&P Average Market

Return over the last 10 Years?

12.7%

Ibbotson, Morningstar and

Fidelity studies show

Average Investor Returns

over the last 10 Years.

2.3%


Kootenay valley financial services

FRICTION

INVESTMENT

The THREE Barriers to financial success

  • _____________________

  • _____________________

  • _____________________

Taxes

Inflation

Inefficient

Diversification


Kootenay valley financial services

Notice the huge impact TAXES can have on your wealth

Let’s look at TAXES!!!

If $1 doubles every year for 20 years

$100 =

In a

40% Tax Bracket

$12,089

In a

28% Tax Bracket

$51,353

$1,048,576


Kootenay valley financial services

What is RISK?

Name the TWO

kinds of risk:

1. _____________________________

Loss of Capital

Loss of Purchasing Power

2. _____________________________


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What Causes LOSS of CAPITAL?

It’s all about Volatility


Kootenay valley financial services

Whose Numbers are those?

They are not

Yours

- UNLESS

You are Buying or

Selling


Kootenay valley financial services

Index

High29%

Low- 5%

+17%

+29%

-17%

- 5%

How do you measure Volatility?

Average ROR

+/-

12%

17

12%

Average ROR

Risk is ALL ABOUT Volatility


Kootenay valley financial services

A

V

ERAGE

3.6%

4.8%

3.4%

Now let’s look at INFLATION

13.0%

9.0%

6.8%

4.8%

7.0%

12.2%

8.8%

3.4%

3.4%

5.5%

6.1%

4.7%

3.0%

3.3%

1.9%

1.2%

1.7%

1.2%

0.7%

1.5%

1.5%

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

3.0%

2.7%

1.6%

1.7%

3.3%

2.7%

2.7%

2.8%

3.0%

3.1%

6.1%

4.6%

4.4%

4.4%

1.1%

3.8%

4.0%

3.8%

3.9%

8.9%

12.4%

1979

1978

1977

1976

1975

1974

1973

1972

1771

1970

1969

1968

1967

1966

1965

1964

1963

1962

1961

1960

1959

1.8%

3.0%

2.0%

0.4%

- 0.5%

0.6%

0.9%

5.9%

5.8%

- 1.8%

2.7%

9.0%

18.2%

2.2%

2.1%

3.2%

9.3%

9,7%

1.0%

- 0.5%

- 2.8%

1958

1957

1956

1955

1954

1953

1952

1951

1950

1949

1948

1947

1946

1945

1944

1943

1942

1941

1940

1939

1938


Kootenay valley financial services

Does History Really Repeat Itself?

COMMODITY

1970

TODAY

INFLATION

$ .50

$ 85.00

$235,000

$ 25,000

$ 2.39

$ 2.15

$ 18,500

5.85%

8.43%

7.76%

6.68%

8.12%

4.98%

4.66%

Stamp

Woman’s Skirt

House

Car

Loaf of Bread

½ Gal Milk

Median Income

$ .09

$ 7.50

$25,000

$ 3,400

$ .23

$ .50

$ 4,594

What is the TRUE Inflation rate?


Kootenay valley financial services

?

% Over age 65

Living to age 90

24%

14%

The longer people live

The longer people live

7%

the higher the risk they

the higher the risk they

will “Run Out of Money”

will “Run Out of Money”

1940

1960

1980

2000

Why is Inflation such a PROBLEM?


The real return of a gic

The ‘Real’ Return of a GIC

GIC yearly return

GIC after marginal tax rate (40%)

GIC Real Return (after inflation)

Source: DataStream, Dec 2001 ($ Cdn)


Real return on 1000 invested 1981 2001

Real Return on $1000 Invested 1981-2001

GIC Real Return 20 yr avg 0.84%

MSCI Real Return 20 yr avg 6.6%

TSE 300 Real Return 20 yr avg 4.3%

S&P 500 Real Return 20 yr avg 10%

$6726.13

$3604.68

$2333.26

$1000 invested in 1981

$1166.97

Source: DataStream, Dec 2001 ($ Cdn)


Kootenay valley financial services

Retirement

But Remember – Risk is also Inflation

So, which Risk is Guaranteed to Happen?


Kootenay valley financial services

94%

100

80

60

40

2%

4%

20

0

Asset

Allocation

Stock

Selection

Timing

What IMPROVES Portfolio Performance

Brinson Study


Kootenay valley financial services

1.

2.

3.

Where should I invest my MONEY?

Name THREE basic Asset Classes?

Cash

Stocks

Bonds


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Stocks

Domestic

International

Large

Medium

Small

Value

Blend

Growth


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Small Cap

Large Cap

Corporate Bonds

Gov’t Bonds

Inflation

Is asset class performance PREDICTABLE?

Historical

Return on

Investment

Volatility Index

5 Year

1 Year

12.4%

39.62%

16.61%

11.3%

20.17%

8.51%

5.6%

8.78%

4.57%

5.1%

9.43%

4.69%

3.3%

4.42%

3.29%


Kootenay valley financial services

The Lipper Study

The Lipper Study

Mutual Funds in the same asset class eventually

Earn the same average rate of return.

REGRESSION TO THE MEAN


Kootenay valley financial services

-1

Zero

+1

Positive – Moves in the SAME direction

Totally Random – no relationship

Negative – Moves in opposite directions

Some asset classes move in

OPPOSITE directions


Kootenay valley financial services

U.S. vs. International

U.S. vs. International

Rolling

12-Month

U.S. outperforms International

Returns

40%

30%

20%

10%

0%

10%

20%

30%

40%

50%

60%

70%

72 76 80 84 86 90 94 98

International outperforms U.S.


Kootenay valley financial services

ASIA

1992

1993

1994

1995

1996

1997

1998

1999

2000

ASIA 30.7

ASIA 108.3

ASIA 60.1

ASIA -9.3

ASIA -8.3

ASIA 3.4

ASIA -45.9

ASIA -4.5

ASIA -39.8


Kootenay valley financial services

Small Cap

1992

1993

1994

1995

1996

1997

1998

1999

2000

Small Cap 30.2

Small Cap 27.7

Small Cap 23.8

Small Cap 4.0

Small Cap 25

Small Cap 0.8

Small Cap 16.9

Small Cap 14.3

Small Cap 4.4


Kootenay valley financial services

Nasdaq

1992

1993

1994

1995

1996

1997

1998

1999

2000

Nasdaq 36.2

Nasdaq 47.4

Nasdaq 77.4

Nasdaq 27.0

Nasdaq 23.3

Nasdaq 26.9

Nasdaq 2.7

Nasdaq 19.3

Nasdaq -36.9


Kootenay valley financial services

S&P 500

1992

1993

1994

1995

1996

1997

1998

1999

2000

S&P 500 39.2

S&P 500 33.9

S&P 500 7.5

S&P 500 23.5

S&P 500 37.8

S&P 500 18.4

S&P 500 14.0

S&P 500 -5.6

S&P 500 14.5


Kootenay valley financial services

Canadian Bond

1992

1993

1994

1995

1996

1997

1998

1999

2000

Canadian Bond 13.0

Canadian Bond 26.3

Canadian Bond 11.6

Canadian Bond 22.1

Canadian Bond 18.5

Canadian Bond 12.8

Canadian Bond 14.2

Canadian Bond -7.4

Canadian Bond -6.0


Kootenay valley financial services

Global Bond

1992

1993

1994

1995

1996

1997

1998

1999

2000

Global Bond 10.2

Global Bond 9.8

Global Bond 20.7

Global Bond 9.2

Global Bond 18.1

Global Bond 12.3

Global Bond 9.6

Global Bond -4.3

Global Bond -1.1


Kootenay valley financial services

T-Bills

1992

1993

1994

1995

1996

1997

1998

1999

2000

T-Bills 5.4

T-Bills 5.5

T-Bills 7.1

T-Bills 4.7

T-Bills 4.7

T-Bills 7.6

T-Bills 4.8

T-Bills 3.2

T-Bills 5.5


Kootenay valley financial services

Europe

1992

1993

1994

1995

1996

1997

1998

1999

2000

Europe 8.8

Europe 29.6

Europe 38.4

Europe 35.3

Europe 22.2

Europe -4.9

Europe 18.8

Europe 5.2

Europe 9.8


Kootenay valley financial services

Dow Jones

1992

1993

1994

1995

1996

1997

1998

1999

2000

Dow Jones 26.0

Dow Jones 33.5

Dow Jones 25.2

Dow Jones 22.6

Dow Jones 16.1

Dow Jones 2.1

Dow Jones -6.2

Dow Jones 4.2

Dow Jones 13.7


Kootenay valley financial services

TSE 300

1992

1993

1994

1995

1996

1997

1998

1999

2000

TSE 300 28.3

TSE 300 31.7

TSE 300 7.4

TSE 300 32.5

TSE 300 15

TSE 300 -0.2

TSE 300 14.5

TSE 300 -1.4

TSE 300 -1.6


Kootenay valley financial services

International

1992

1993

1994

1995

1996

1997

1998

1999

2000

Int’l 14.5

Int’l 38.6

Int’l 29.2

Int’l 20.3

Int’l 8.5

Int’l 6.9

Int’l 6.6

Int’l -11.0

Int’l -3.1


Kootenay valley financial services

1993

1993

1993

1993

1993

1993

1993

1993

1993

1993

1993

1993

1994

1994

1994

1994

1994

1994

1994

1994

1994

1994

1994

1994

1995

1995

1995

1995

1995

1995

1995

1995

1995

1995

1995

1995

1996

1996

1996

1996

1996

1996

1996

1996

1996

1996

1996

1996

1997

1997

1997

1997

1997

1997

1997

1997

1997

1997

1997

1997

1998

1998

1998

1998

1998

1998

1998

1998

1998

1998

1998

1998

1999

1999

1999

1999

1999

1999

1999

1999

1999

1999

1999

1999

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2001

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2002

ASIA 108.3

Int’l 14.5

Nasdaq 36.2

TSE 300 28.3

S&P 500 39.2

Nasdaq 47.4

Nasdaq 77.4

Canadian Bond 13.0

Canadian Bond 8.1

Global Bond 18.5

Int’l 38.6

Europe 8.8

S&P 500 33.9

Dow Jones 26.0

Europe 29.6

Europe 38.4

ASIA 60.1

Global Bond 10.2

Global Bond 5.2

Canadian Bond 10.5

Europe 35.3

S&P 500 7.5

Dow Jones 33.5

S&P 500 23.5

Small Cap 27.7

S&P 500 37.8

TSE 300 31.7

TSE 300 7.4

T-Bills 4.7

T-Bills 2.5

TSE 300 32.5

T-Bills 5.4

Canadian Bond 26.3

Nasdaq 23.3

Nasdaq 26.9

Int’l 29.2

Dow Jones 25.2

T-Bills 5.5

Dow Jones -7.1

ASIA -8.2

Small Cap 23.8

Small Cap 4.0

Small Cap 25

Europe 22.2

Dow Jones 22.6

Dow Jones 16.1

Int’l 20.3

Small Cap 0.8

Small Cap -11.5

TSE 300 -12.4

Canadian Bond 22.1

Nasdaq 2.7

Global Bond 20.7

Small Cap 16.9

Canadian Bond 18.5

Canadian Bond 12.8

Small Cap 14.3

Europe -4.9

S&P 500 -11.9

Int’l -14.9

Nasdaq 19.3

Dow Jones 2.1

Europe 18.8

Canadian Bond 14.2

TSE 300 15

Global Bond 9.2

S&P 500 14.0

S&P 500 -5.6

TSE 300 -12.6

Dow Jones -16.8

Global Bond 18.1

TSE 300 -0.2

TSE 300 14.5

Global Bond 12.3

Global Bond 9.6

T-Bills 4.7

Europe 9.8

Dow Jones -6.2

Europe -15.0

Europe -17.5

S&P 500 14.5

Global Bond -4.3

Int’l 8.5

Int’l 6.9

Int’l 6.6

Small Cap 4.4

T-Bills 4.7

Int’l -11.0

Int’l -16.5

Small Cap -20.5

Dow Jones 13.7

Canadian Bond -7.4

T-Bills 7.6

T-Bills 4.8

T-Bills 3.2

TSE 300 -1.6

Global Bond -1.1

Nasdaq -36.9

ASIA -23.8

S&P 500 -22.1

T-Bills 5.5

ASIA -9.3

ASIA -8.3

ASIA 3.4

ASIA -45.9

ASIA -4.5

Canadian Bond -6.0

ASIA -39.8

Nasdaq -28.5

Nasdaq -37.6


Kootenay valley financial services

VALUE

TIME

Why are Correlation Coefficients

important?

This is Called INEFFICIENT Diversification


Kootenay valley financial services

VALUE

B

TIME

We need to create DISSIMILAR

Price Movements

A&B

A

This is Called EFFICIENT Diversification


Kootenay valley financial services

YEAR

RETURN

RETURN

14%

15%

13%

16%

4%

1

2

3

4

5

25%

25%

25%

25%

-30%

14.00%

12.40%

Average ROI

IRR

IRR

11.3%

11.3%

12.2%

12.2%

Determine the REAL rate of return


Kootenay valley financial services

IRR

IRR

11.3%

11.3%

12.2%

12.2%

Determine the REAL rate of return of

$100,000

YEAR

RETURN

RETURN

25% - $125,000

25% - $156,250

25% - $195,312

25% - $244,140

14% - $114,000

15% - $131,100

13% - $148,143

16% - $171,846

1

2

3

4

5

-30% - $170,898

4% - $178,719

12.40%

Average ROI

14.00%


Kootenay valley financial services

AVERAGE RATE OF RETURN FOR 9 YRS. OF 11.9%

INTERNAL RATE OF RETURN ????????


Kootenay valley financial services

VALUE

TIME

Why is this IMPORTANT?

This effect can ONLY be consistently

achieved with EFFICIENT Diversification


Kootenay valley financial services

Discover your optimal risk allocation

YEARS

30

25

20

15

10

5

1

100% Stocks

80% Stocks/20% Bonds

60% Stocks/40% Bonds

50% Stocks/50% Bonds

40% Stocks/60% Bonds

20% Stocks/80% Bonds

100% Bonds

35 40 45 50 55 60 65 70

AGE


Kootenay valley financial services

Nobel

Prize

Three Professors from the Chicago

School of Economics (Miller, Sharpe

and Markowitz) received the

in 1990 for these

NOBEL PRIZE

research conclusions:

1. Reduce Investment Risk

2. Increase Return

3. Create Dissimilar Price

Movements

4. Use Asset Allocation


Kootenay valley financial services

Optimum Mix

What is the EFFICIENT FRONTIER?

 100%

International

Return

100%

 Large Cap

Risk


Recession 1 1974 75

US GDP and S&P 500

Recession Ends

Source: Datastream

Recession #1 – 1974/75


Recession 2 1981 1982

US GDP and S&P 500

RecessionEnds

Source: Datastream

Recession #2 : 1981/1982


Recession 3 1990 1991

US GDP and S&P 500

Recession Ends

Source: Datastream

Recession #3: 1990/1991


A tale of three recessions

Market bottom

S&P +1 year

Recession End

Dec 1974

+ 47%

Q2 ’75

Aug 1982

+ 67%

Q1 ’83

Sept 1990

+ 34%

1H ’91

A Tale of Three Recessions


History and crisis events dji reaction

Event

Reaction Dates

Date Range % Loss/Gain

22 mkt days

63 mkt days

126 mkt days

Fall of France

5/9/1940 - 6/22/1940

-17.1%

-0.5%

8.4%

7.0%

Pearl Harbor

12/6/1941- 12/10/1941

-6.5%

3.8%

-2.9%

-9.6%

Truman Upset Victory

11/2/1948- 11/10/1948

-4.9%

1.6%

3.5%

1.9%

Korean War

6/26/1950- 7/13/1950

-12.0%

9.1%

15.3%

19.2%

Eisenhower Heart Attack

9/23/1955- 9/26/1955

-6.5%

0.0%

6.6%

11.7%

Sputnik

10/3/1957- 10/22/1957

-9.9%

5.5%

6.7%

7.2%

Cuban Missile Crisis

10/19/1962- 10/27/1962

1.1%

12.1%

17.1%

24.2%

JFK Assassination

11/21/1963- 11/22/1963

-2.9%

7.2%

12.4%

15.1%

US Bombs Cambodia

4/29/1970- 5/26/1970

-14.4%

9.9%

20.3%

20.7%

Kent State Shootings

5/4/1970 -5/14/1970

-4.2%

0.4%

3.8%

13.5%

Arab Oil Embargo

10/18/1973- 12/5/1973

-17.9%

9.3%

10.2%

7.2%

Nixon Resigns

8/9/1974- 8/29/1974

-15.5%

-7.9%

-5.7%

12.5%

USSR in Afghanistan

12/24/1979- 1/3/1980

-2.2%

6.7%

-4.0%

6.8%

Hunt Silver Crisis

2/13/1980- 3/27/1980

-15.0%

6.7%

16.2%

25.8%

Falkland Islands War

4/1/1982- 5/7/1982

4.3%

-8.5%

-9.8%

20.8%

US Invades Granada

10/24/1983- 11/7/1983

-2.7%

3.9%

-2.8%

-3.2%

US Bombs Libya

4/15/1986- 4/21/1986

2.6%

-4.3%

-4.1%

-1.0%

Financial Panic ’87

10/2/1987- 10/19/1987

-34.2%

11.5%

11.4%

15.0%

US invasion of Panama

12/15/1989- 12/20/1989

-1.9%

-2.7%

0.3%

8.0%

Gulf War Ultimatum

12/24/1990- 1/16/1991

-4.5%

17.0%

19.8%

18.7%

Gorbachev Coup

8/16/1991- 8/19/1991

2.4%

4.4%

1.6%

11.3%

ERM UK Currency Crisis

9/14/1992- 10/16/1992

-6.0%

0.6%

3.2%

9.2%

World Trade Centre Bombing

2/26/1993- 2/27/1993

-0.5%

2.4%

5.1%

8.5%

Russia,Mexico,Orange County

10/11/1994- 12/20/1994

-2.8%

2.7%

8.4%

20.7%

Oklahoma City Bombing

4/19/1995- 4/20/1995

0.6%

3.9%

9.7%

12.9%

Asia Stock Market Crisis

10/7/1997- 10/27-1997

-12.4%

8.8%

10.5%

25.0%

US Embassy Bombings In Africa

8/7/1998- 8/10/1998

-0.3%

-11.2%

4.7%

6.5%

Russia default, LTCM Crisis

8/18/1998- 10/8/1998

-11.3%

15.1%

24.7%

33.7%

History and Crisis Events – DJI % Reaction


Kootenay valley financial services

1. What do you have?

2. What do you need?

3. How do you fill the gap?


Kootenay valley financial services

What do you HAVE? What do you NEED?

  • Invest in pure assets

    • Institutional instead of retail

    • Avoid style drift

  • 2. Combine dissimilar asset classes

    • Stay on the efficient frontier

    • Utilize multiple asset classes


Kootenay valley financial services

What do you HAVE? What do you NEED?

  • 3. Minimize the tax effect

    • Reduce turnover

    • Use tax-free investments when

    • appropriate

    • Achieve deferred TAX growth,

    • if possible

  • 4. Minimize expenses

    • No wrap fees

    • No loads

    • No surrender charges

    • No trading costs


Kootenay valley financial services

35+

30

25

20

15

10

5

30

35+

25

20

10

5

15

What do you HAVE? What do you NEED?

  • How many years do you

  • have until you retire?

2. What is your investment time

horizon?


Kootenay valley financial services

Years to

Retire

Inflation

Factor

1

1.03

2

1.07

3

1.10

4

1.14

5

1.17

6

1.21

7

1.25

8

1.29

9

1.33

10

1.38

11

1.42

12

1.47

13

1.52

14

1.56

X

15

1.62

16

1.67

17

1.72

18

1.78

$ _____________ % required at retirement

19

1.84

1.90

20

20

1.90

1.96

21

=

2.02

22

23

2.09

24

2.15

25

2.22

$ _____________ Your retirement goal

26

2.30

27

2.37

28

2.45

29

2.53

X

30

2.61

31

2.70

32

2.78

33

2.87

$ _____________ Your INFLATION Factor

34

2.97

35

3.06

36

3.16

=

37

3.27

38

3.37

39

3.48

40

3.59

41

3.71

$ _____________ Your INFLATION Adjusted Income

at retirement.

42

3.83

43

3.96

44

4.08

45

4.22

How much retirement income

Will you NEED each month?

$42,000

$ _____________ Current Annual Income

70%

$29,000

1.90

$55,100


Kootenay valley financial services

Annual income

12

Now we will estimate your Social Security Income

Step 1. Enter your current monthly income.

$42,000

$3,500

=

=

12

1965

Step 2. Enter your Year of Birth.

65

Step 3. Age of Expected Retirement.


Kootenay valley financial services

Year of Birth

  • Using your income,

  • find the correct

  • BOX. _________

Age

at

Retirement

1958

or

After

1941

to

1957

1958

or

After

1940

or

Before

$3,500

62 or Prior

63

64

65

66

67

0.27

0.29

0.32

0.34

0.36

0.37

0.26

0.27

0.30

0.32

0.34

0.37

0.24

0.26

0.28

0.30

0.32

0.35

1965

65 0.34 0.32 0.30

65

0.30

To Calculate Your Factor – Follow These Steps

Step 4. Find the Social

Security Factor.

$3500 per month

  • Then use your

  • Birth YEAR. ________

  • And your AGE

  • at retirement. ________

4. FIND the correct

monthly factor. ________


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X

Second – Input your Social Security Factor.

=

Third – Calculate your projected Social Security

Benefit.

Now we will estimate your Social Security Income

Step 5. Figure your Social Security Income.

First – Determine The Smaller Of Your Annual

Income or $68,400.

$42,000

0.30

$12,600


Kootenay valley financial services

First – Enter your Adjusted Annual Income

at retirement.

-

Second – Now enter your projected annual

Social Security benefit.

=

Third – Your NET Inflation Adjusted

Retirement (NIA) Income.

Let’s calculate how much NET INCOME

you’ll need at retirement.

$55,100

$12,600

$42,500


Kootenay valley financial services

P

ension F

actor

P

ension F

actor

Age

Life

at

Expectancy

Retirement

Factor

55

18.75

56

18.41

57

18.00

58

17.66

-

Step 1. Your projected NIA

income.

59

17.25

60

16.83

61

16.42

62

16.00

Step 2. Your projected pension

benefit, if any.

Step 4. Now select your life

expectancy factor.

=

63

15.50

64

15.08

65

14.58

65

14.58

66

14.08

Step 3. Your NIA income less

any pension benefit.

Step 5. Total CAPITAL required

to meet your goal.

67

13.50

X

68

13.00

69

12.42

70

11.83

14.58

71

11.25

=

72

10.58

73

9.92

74

9.25

75

8.58

Let’s calculate how much CAPITAL

will be needed to provide this income.

$42,500

$0

$42,500

$619,650


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Step 1. Your Accumulated assets.

X

Step 2. Growth Factor.

How much will my current SAVINGS

help me reach my goal.

List your Assets – 401(k), IRA, 403(b), Mutual Funds

FMV

Type

$15,000

IRA

1. __________________

2. __________________

3. __________________

________________

________________

________________

________________

401(k)

$25,000

$ 5,000

Mutual Funds

$45,000

Total

$45,000

?


Kootenay valley financial services

Growth F

actor

Growth F

actor

Yrs to

6%

8%

10%

Retir

e

1

1.06

1.08

1.10

2

1.12

1.17

1.21

3

1.19

1.25

1.33

4

1.26

1.36

1.46

5

1.34

1.47

1.61

6

1.42

1.59

1.77

7

1.50

1.71

1.95

8

1.59

1.85

2.14

9

1.69

2.00

2.36

10

1.79

2.16

2.59

11

1.90

2.33

2.85

12

2.01

2.52

3.14

13

2.13

2.72

3.45

14

2.26

2.94

3.80

15

2.40

3.17

4.18

AGE at Retirement

16

2.54

3.43

4.59

17

2.69

3.70

5.05

18

2.85

4.00

5.56

Current AGE

19

3.03

4.32

6.12

20

3.21

4.66

6.73

21

3.40

5.03

7.40

22

3.60

5.44

8.14

Years until Retirement

23

3.82

5.87

8.95

24

4.05

6.34

9.85

25

4.29

6.85

10.83

26

4.55

7.40

11.92

Step 2. Look up Growth Factor at

8%.

27

4.82

7.99

13.11

28

5.11

8.63

14.42

29

5.42

9.32

15.86

10.06

10.06

17.45

30

5.74

30

5.74

10.06

17.45

31

6.09

10.87

19.19

32

6.45

11.74

21.11

33

6.84

12.68

23.23

X

34

7.25

13.69

25.55

35

7.69

14.79

28.10

36

8.15

15.97

30.91

Step 3. Accumulated assets.

37

8.64

17.25

34.00

38

9.15

18.63

37.40

39

9.70

20.12

41.14

=

40

10.29

21.72

45.26

41

10.90

23.46

49.79

42

11.56

25.34

54.76

43

12.25

27.37

60.24

Step 4. Capital Available at 65.

44

12.99

29.56

66.26

45

13.75

31.92

72.89

Figuring the Growth Factor

Step 1. Determine the number of

Years to retirement.

65

35

30

$45,000

$452,700


Kootenay valley financial services

Saving F

actor

Saving F

actor

Yrs to

6%

8%

10%

Retir

e

1

12

12

12

2

25

25

26

3

39

40

41

4

55

57

58

5

72

75

78

Step 1. Total CAPITAL required

to meet your goal.

6

90

95

100

7

110

117

124

-

8

132

141

151

9

155

168

182

10

181

198

216

11

208

230

254

12

238

265

297

13

269

304

344

Step 2. Capital Available at 65.

14

304

347

397

15

341

393

455

16

381

444

520

17

423

500

592

18

470

560

672

19

519

626

761

Step 3. Additional CAPITAL you

need to create before

retirement.

20

572

699

859

21

629

777

968

22

691

863

1088

23

756

956

1221

24

827

1058

1368

25

902

1168

1531

.

.

26

983

1288

1710

27

1069

1419

1909

28

1162

1561

2128

29

1261

1715

2371

1883

2638

1883

30

1367

1883

2638

Step 4. Determine the Saving Factor

30

1367

31

1481

2065

2933

32

1602

2262

3259

33

1731

2476

3618

Years until Retirement

34

1870

2709

4014

35

2017

2961

4451

Look up Saving Factor

at 8%.

36

2175

3235

4933

37

2344

3532

5465

38

2523

3854

6050

39

2715

4202

6696

=

40

2920

4580

7407

41

3138

4990

8191

42

3371

5434

9055

43

3619

5914

10006

Step 5. The Additional amount

you need to SAVE

44

3884

6435

11054

45

4166

6999

12209

How much MORE will you have

to SAVE to reach your goal?

$619,650

$452,700

=

$166,950

30

$89 per month


Kootenay valley financial services

1. What do you have?

2. What do you need?

3. How do you fill the gap?


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