Strategic rate of return planning unlocks financial peace.
The Johnsons, at 42 and 44, have $2.1 million in retirement savings but three children aged 8, 12, and 15. With projected college costs exceeding $250,000 per child, they face a $750,000 funding gap while simultaneously needing to ensure their retirement nest egg continues to grow adequately. They are unsure what rate of return they need to target to comfortably meet both obligations.
Using the Discount Rate Calculator with the Gordon Growth Model, we determined the Johnsons need to achieve an average annual return of 7.8% on their investments, factoring in inflation and projected college expenses. This benchmark allows them to strategically allocate assets and re-evaluate their portfolio performance annually, ensuring they stay on track to meet their dual goals of funding college and a comfortable retirement.
We inputted their current retirement savings, projected college costs, expected retirement expenses, inflation rate, and dividend growth rate into the Gordon Growth Model within the Discount Rate Calculator to determine the necessary rate of return. This data was then used to adjust their asset allocation.
$350,000 projected increase in retirement savings by age 65 through optimized investment strategy.
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