How much is enough? Will you be able to do the things that are really important to you over the course of your life without running out of money? The majority of us probably don’t know the answer.
To put some context on the question, take a non-smoking couple aged 65. Statistics suggest that they have a joint life expectancy of 30 years which means that, on average, one of them will live to age 95. If inflation averages 2.5% pa over the 30 years, their cost of living will rise 2.1 times i.e. it will cost € 2.11 in year 30 to buy what €1 bought in the first year. If you don’t have a plan to increase your income by as much as your cost of living increases, then you are much more likely to run out of money. Inflation is a serious and often under-managed risk and it is just one of the many variables you need to consider when figuring out how much is enough.
The vast majority of people we meet are not sure how much money they’ll need for the rest of their life and whether their current and future income, savings and investments are likely to be sufficient to meet the cost of their desired lifestyle. Many people have never had their personal finances framed in this way.
At iQ Financial, our focus is on protecting your lifestyle, on making sure you always have enough money to do the things that matter to you. We do this by helping you to identify your goals and by then developing a well thought-out Financial Plan designed to help you achieve those goals. Your long term savings and investments are usually the main financial drivers of your plan and we will help you to put an effective investment strategy in place.
We will leave you with two statistics & one thought that we hope give you a taste of the way we look at things.
• Since 1960, a timeframe that takes in the lifetime of most of us not yet retired, the Consumer Price Index has grown at around 2.50% pa.
• The dividend, just the cash income mind you, from shares in the S&P 500 US Stock Index have grown at 5.9% pa. The S&P 500 is made up of some of the largest, most innovative and profitable companies in the world.
So, the companies in the S&P 500 have been raising their dividends at something close to twice the inflation rate for as long as most of us have been alive.
Here’s that one thought, dividends are an important way that smart people have kept their income growing well ahead of their living costs.
If you want to find out more, get in touch for a no-obligation chat. Coman & Enda Brady www.iqf.ie