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Retirement Money Management: The Time Value of Money Method

Good Essays
Larry R. Frank Sr. is an advisor in Roseville California and is trying to explain how you can use your retirement money and make it last longer through the time value of money method. Some people when they retire, follow the advice that withdrawing 4% of their savings yearly will help save their money and make it last even longer.
However, there is no doubt that this method can work but there is one important aspect to look at. Time. It is the most important factor everyone is cautious of and if well managed, produces great results and provides even more time. Looking at this example Larry Light gave in his article, if you withdraw 4% of your retirement savings for 30 years, there is a high chance you would outlive your money. But most importantly is how you time your retirement. Time is a very important key factor to everything we do in our day to day activities. According to the teaching of the assistant pastor of United Charismatic healing ministry, Pastor Amos Ayitei, he says “if you don’t use time wisely it is obvious that time will use you”.
The community has a way of changing for the good or bad for people. It could be recession, inflation or anything. But they all start gradually that’s why Larry Light brings to light how not to run out of money in retirement through the time value of money method. Using this example, two twins follow the 4% rule savings plan to save for their retirement, each with a million dollars and identical portfolio allocation. Jeremy the first twin saves forty thousand dollars using the 4% rule and he wisely increases it by 3% for inflation each year. On the other hand the second twin Jeremiah retires a year later than his twin brother Jeremy, unfortunately it was a year when there was a great d...

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...money right now will have their thousand dollars plus interest, and those who choose the latter option which is collecting the money in three years will have their thousand dollars minus interest because they did not do anything with the money.
In conclusion, time is money and knowing investment options, interest rates, and the formation of calculations of both present and future value as I have learnt in this class, will be a great deal of help both now and in the future. “Time is money”. The value of money right now the same as it will be in the future and vice versa. So this is to encourage us that we should know the appropriate investment of money in other to differentiate between the worth of investments that offer us returns at different times.

Reference
(http://www.forbes.com/sites/lawrencelight/2014/04/07/how-to-avoid-running-out-of-money-in-retirement/)
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