Assume That You Want to Retire Early at Age 60

question 58

Essay

Assume that you want to retire early at age 60. You plan to save using one of the following two strategies: (1) save $2,000 a year in an RRSP beginning when you are 20 and ending when you are 60 (40 years) or (2) wait until you are 40 to start saving and then save $8,000 per year for the next 20 years. Assume that you will earn the historic stock market average of 10% per year.
How much savings will you have accumulated at age 55 under the two options?

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Definitions:

Net Operating Income

A measure of a company's profitability from its core business operations, excluding income and expenses from non-operational activities.

Price Hike

An increase in the selling price of goods or services, which can be due to factors like higher production costs, supply shortages, or increased demand.

Traceable Fixed Expense

A traceable fixed expense is a cost that can be directly linked to a specific business segment or department without influencing other areas of the business.

Net Operating Income

A measure of company profitability equal to revenue minus operating expenses, excluding taxes and interest.