One of the things I do that allows me to really get into investments, budgeting, saving money, is spreadsheeting it all out and forcasting the returns I might reap based on a given set of assumptions. While the accuracy is only as good as the set of assumptions (i.e. ROM at best), it does allow one to visualize the long term impact of saving that extra $20 a week now.
Right or wrong, I usually set as my goal to "match my yearly income" via either the yearly assumed ROR or the "yield" from an income producing security, with a assumed level of fat built in.
To do this, I need some sort of gauge as to what my income might be at retirement in "actual dollars."
Usually to do this, I do a BasePay*(1+Inflation+Raises)^N where Inflation is any yearly COLA style adjustments (as a decimal) I assume, Raises is any yearly merit based or promotion style adjustments I assume (as a decimal), and N is the years since BasePay. I then usually impose a blanket maximum that is largely arbitrary. I don't see this as accurate as it is exponential until it suddenly maxs out.
I'm only 4 years into my career following college, and my salary increases certainly have not in anyway resembled this model. Extrapolating 35 more years into the future makes no sense.
Therefore, I am looking for advice on how to approach a spreadsheet style model of personal income from now until an arbitrary retirement age from those of you who are older and substantially further along in your careers, or do this sort of thing professionally.
I would like to account for:
- Salary increases
- Probably salary maximums (i.e. how long in before one usually peaks and raises become COLA only)
About the only limitations I can think of are:
- White collar, technical, private, non-union
- Non executive track
- Lower management and technical tracks carry wholly equivalent salary
- (Senior person salary @ ~30 years / 0 experience grad) at least in my industry is roughly 2.7 to 3.0