Blog Layout

Investment Advice and Planning: Structure - Module 2.2 Income

Edward Ketterer • May 17, 2021
Income

Fundamental to a comfortable and stable living environment is Income security and income growth.


Income is the 2nd foundation to the structure of a financial plan and its significance is simply the means to maintaining and developing a quality of life based on needs and wants - from putting food on the table, paying utilities and education to celebrating important events to taking holidays including the purchase of personal assets and funding retirement. An essential feature is its ability to grow over time to offset a rise in inflation or simply put - the cost of living.


Sources of income can vary but the need for a consistent, stable and growing source over time is essential. It may be generated from multiple sources and these sources may very well change over time and based on the stage of life a person has reached. Essentially putting a portion of an income aside for the future is a key element to ensuring that future needs and wants can be met. 
In order to determine how much is required to meet average daily living expenses there are a number of ways to establish the amount needed.

  • If a portion of income is needed to meet the rental expense of a home or apartment a general rule of thumb is to take the monthly or yearly rental cost and use a multiple of 3 or 4 times that to determine the net income requirements for overall living expenses and the reverse is true for establishing how much rental expense can be absorbed out of a given income stream i.e., a third or a quarter of the net income received can be considered a reasonable guide.
  • Another approach is to take the average of the total living expenses over the last 3 years as a guide for what income is needed in following years - especially into retirement.
  • Whilst the preceding can determine what income is needed to live it becomes important to establish what is needed and wanted when heading into retirement and how to build the retirement nest egg. It can be stated that it is never too early to start to save for retirement and there are a number of guidelines used to determine how much should be put aside based on the age at which saving begins.
  • Some advice is to expect to spend between 70% to 80% of the last salary received to meet retirement spending needs.
  • Another is to expect to need double digit multiples of your pre-retirement salary to serve as a base from which you can receive a retirement income.
There are a number of different calculators available that will consider what you can expect based on the amount you put away. Factors considered are assumed and provide only an indication of what is needed and certainly only potentials i.e.
  • Assumed percentage of monthly salary saved 
  • Assume a 2% increase in salary per annum
  • Assume a rate of inflation which can be based on the average inflation rate of the last 3, 5 and 10 years.
  • Assume a rate of return on funds saved based on the investment profile of the individual and then matched against historical returns of established portfolios used to accumulate superannuation savings – this could provide an indication of potential returns – but only an indication and not a guarantee.
It should be understood that there are a lot assumptions involved in determining how much to save to generate a retirement income and there are no guarantees that it will last or that you won’t out live what you have saved. 
What this highlights is the need for on-going reviews and advice from a qualified financial advisor in the jurisdiction in which one lives as this will provide a base from which to consider tax implications, cost of living, and access to government pensions, if available, and the type of superannuation plans suitable to one’s personal circumstances.

We will also consider how to protect income sources during the saving stages of an investor’s life and the significance and role that insurance could play in this process and for this I would refer back to Module 1.4 “Insurance” as a reference to what is available that could replace sources of income or even become part of the income funding source besides or on top of growth investments.

In Module 2.3 “Growth” and Module 3 “Strategy” we look at ways in which income can be generated through the selection of growth investments and how it can be put aside for future requirements which ultimately lead to retirement and any desired legacies to be founded.

Let's Talk

Do more, be more, accomplish more. If you would like help on your journey then I'm here to help you get started.


Don't wait another moment. The time is now. The person is you. 

Take the leap and get in touch or follow me https://www.creativecoachonline.com/ or email edward@creativecoachonline.com



Copyright © Edward Ketterer 2021

Edward Ketterer has asserted his rights to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner.


Managed Portfolios – Risks

Investment Advice and Planning: Strategy - Module 3.10 Managed Portfolios – Risks

By Edward Ketterer • April 11, 2023
The selection of assets that comprise a portfolio of investments should always be determined by the risk tolerance of the investor.

Investment Advice and Planning: Strategy - Module 3.9 Managed Portfolios – Rule of Thumb

By Edward Ketterer • July 14, 2022
Rule of Thumb is a simple guide and reference point from which a more detailed analysis can occur. It is not based on science but on experience and at best highlights a potential initial outcome or an indication of what may be possible.

Investment Advice and Planning: Strategy - Module 3.8 Managed Portfolios – Global Capital Markets

By Edward Ketterer • July 12, 2022
With diversification across different Global Capital Markets, potential, high returns can best be realized when investment timeframes and funding commitments are managed to reflect the investors’ risk profile.
ESG & CSR Strategies

Investment Advice and Planning: Strategy - Module 3.7 Managed Portfolios – ESG & CSR Strategies

By Edward Ketterer • July 12, 2022
The world becomes a greener place and a more pleasant land when all investors participate by investing in those who have taken up the mantel of ensuring a sustainable pleasant and encouraging workplace and environment to live in.
Stock Picking Analytics

Investment Advice and Planning: Strategy - Module 3.6 Managed Portfolios – Stock Picking Analytics

By Edward Ketterer • July 11, 2022
Stock-picking Analytics – how to find stocks that have the potential for growth at reasonable prices whilst studying price movements through trend lines and pattern recognition protocols for more immediate returns.

Investment Advice and Planning: Strategy - Module 3.5 Managed Portfolios – Alternatives

By Edward Ketterer • December 20, 2021
To broaden diversification, provide lower volatility and higher potential returns investors are increasing looking at Alternative investments which are very much in keeping with the concept of “Time In, Not timing” as outlined in the article “Diversification and Investment Time Frame”.
Managed Portfolios - Structures

Investment Advice and Planning: Strategy - Module 3.4 Managed Portfolios - Structures

By Edward Ketterer • December 13, 2021
From the foundation of a Managed Portfolio a Strategy takes form and built through a structure that best represents the considerations and outcomes to be achieved.
Managed Portfolios

Investment Advice and Planning: Strategy - Module 3.3 Managed Portfolios – Defined & Outlined

By Edward Ketterer • December 13, 2021
With the creation of a Managed Portfolio a foundation is developed from which a Strategy takes form.
Show More
Share by: