Required Savings Rate

This project was developed to demonstrate a potential research project to colleagues. Continuing the investment crossover project, this work extends the scope to include the decumulation phase, offering a more comprehensive perspective on financial planning throughout an investor’s lifetime.

The assumptions of this project are the same as the investment crossover project.

Now suppose the client wants to know what percentage of income they need to invest to achieve certain retirement goal, which is a targeted income replacement ratio upon retirement.

Using the single-year complete life tables published by Statistics Canada, we may compute the required savings rate for a given retirement goal.

Note that if the required savings rate is greater than 1, then it is impossible to achieve their retirement goal unless they are willing to retire later.