I am a strong proponent of loading up on I Savings Bonds issued by the US Government treasury. In treasury’s own words
I Bonds are a low-risk, liquid savings product. While you own them they earn interest and protect you from inflation.
- Sold at face value; you pay $50 for a $50 bond.
- Purchased in amounts of $25 or more, to the penny.
- $10,000 maximum purchase in one calendar year.
- Issued electronically to your designated account.
Great post over at FT Alphaville today that talks about the crazy low yields in the corporate bond market. Since the GFC (Great Financial Crisis of 08) investors have been running scared and looking for safety in large numbers. This has caused corporate bond yields to hit new multi-year lows. Remember in Bond Math, when there is lots of demand, prices are high and consequently yields are low. The yeild is the interest rate that the company issuing the debt has to pay out. Lower the yield, better for the company.
It’s a question we should have an answer to. What’s your retirement number, how much money do you need to live comfortably through retirement.
It’s a complicated question, and scares most people (it scared me :)) But have no fear, Excel to the rescue! You can build a rudimentary model to at least get a good idea of your number. All values in the model are post-tax numbers. Tax effects are for another post!
Some base assumptions:
- Retirement age is 65
- Life expectancy is 80
Lets break it down.