1EGR 403 Retirement Planning - Part I

EGR 403 Introduction to Retirement Planning

• Part I - Basic Approach• Part II - Determine Total Capital to Invest

• Part III - Saving Strategy

• Part IV - Investment Strategy

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Dr. Phillip R. RosenkrantzIME Department, Cal Poly Pomona

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Disclaimer• This class project is not intended to replace the

advice and counsel of licensed financial planners. It is primarily a class exercise to illustrate the concepts of EGR 403.

The approach used is based largely on the book: “How to Retire Early and Live Well (with less than $1,000,000)” by Gillette Edmunds

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Variables to Determine How Much You Need to Live On

• Total Expenses per year

• Total Capital to invest

• Future increases in expenses

• Estimated rate(s) of inflation

• Investment management fees

• Annual total return from investments

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Basic Retirement CFD

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Where to Start?

• How much, in today’s dollars, will you need to retire in the manner you desire?

• When would you like to retire?• Will you have any pension fund or part-

time income at that time?• What inflation rate do you want to use?• What kind of an investment manager are

you?

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Our Approach

• Figure out how much you want to have at retirement, then

• Work backwards to determine how much you need to save starting now.

• Analyze the impact of changes in your assumptions (sensitivity analysis)