Money Ratios

You need 12x your income in your retirement fund to retire

• E.g. Assume you earn $50,000/year (total income before taxes)
• You need $600,000 saved for retirement.
• Assuming annual withdrawal of $40,000 (80% of your salary) of that $600,000 and leave the rest invested.
• In order to maintain the same balance (e.g. $600,000), the investment

would have to earn 7.15% (not accouting for inflation)

• Save 12% of your income (if you’re 45 or under)
• 15% (if you’re over 45).

• Superannuation for 401(k)
• IRA, then to other investing options.
• Make it automatic.

• Mortgage is pretty much the only significant debt an adult should acquire.
• Get rid of car payment

Farrell recommends 50/50 stock/bond split if under 60 Shift to bonds as you get older.

• Diversify to lower risk.
• Spread investments over multiple companies,
• Including international, small cap and large cap stocks
• Your bond investments keep in government bonds, but diversified
• Rebalance annually - move money between the stocks and bonds to restore the overall 50-50 balance described earlier.

• Don’t spend your time worrying about what Wall Street is saying.
• They’re often worried about the short term – the next few years.
• You’re worried about the long term, something rarely discussed on TV

• Recommends getting coverage equal to 60% of your income, which will roughly amount to your current income after taxes.

• Should pay out 12 times your salary minus your capital-to-income ratio
• E.g. $70,000/year x 12 = $840,000
• As you save - you should need less life insurance.

• Look into long-term care insurance in your mid-fifties.
• Before that, the risk is so low - not worth the cost.
• After that, your risk goes up - cost might be prohibitive.