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Wes Moss Gives Advice on Calculating Your Rich Ratio

In a recent article with Palm Beach Daily News, Wes Moss gives advice on how consumers can calculate their ‘Rich Ratio’.

As the Chief Investment Strategist at Capital Investment Advisors and author of You Can Retire Sooner Than You Think, Wes Moss suggests that you shed the misconceptions that everyone has drummed into your head about wealth. 

Perhaps you drive a BMW, Mercedes or Rolls. You might have a home in Palm Beach, New York and Paris. But are you truly rich?
According to Moss, Wealth isn’t defined by income. Nor is it defined by your net worth; rather, it’s based on your “investable assets.”

To make sure you’re as wealthy as you think, Moss suggests that you determine your “rich ratio.” Your rich ratio simply is the amount of money you have in relation to the money you need to realize your dreams.

To do this calculation, take your monthly income, such as Social Security, pension, monthly earnings off your nest egg and any other income streams. Then, divide it by the amount you expect to spend each month to live your life the way you want. Your goal, to be really rich, is to come up with a result that is greater than 1.

For example, you might think Jennie, who is sitting on a $1 million retirement account, gets a $1,000 monthly pension and $1,800 monthly in Social Security, is pretty well off. After all, Moss figures, her $1 million retirement account ought to contribute $4,100 monthly if she takes 5 percent of that account annually and each month adds it to her income.

The problem is Jennie wants to spend $10,000 monthly on travel.

So if you add up all Jennie’s income streams, including her retirement account income, you get $6,900. Divide them by the $10,000 monthly she needs to do all the traveling she’d like to do, and she flunks the rich ratio test. Her rich ratio is only .69 — significantly below her goal of 1.

You might think that Christopher, with just $400,000 in his retirement account, isn’t exactly rolling in dough. He only gets $1,200 monthly from a pension, $1,800 in Social Security and $1,650 monthly, based on 5 percent annually taken in monthly withdrawals from his retirement account, Moss figures. Christopher’s total monthly income: $4,650.

But because Chris has paid off his home and only needs $3,500 monthly to enjoy his life, he passes the test of being rich with flying colors. His rich ratio is 1.32 — significantly greater than he needs to fit the definition of “rich.”

Chris, according to Moss, is headed for happiness. Jennie, unless she makes some changes, is not.

Tell that to Congress, our president, the IRS, the Securities and Exchange Commission — and all those other users of significantly less meaningful definitions of wealth.

– See more at: http://m.palmbeachdailynews.com/news/news/local/calculate-your-rich-ratio-to-determine-wealth-auth/ngK6J/#sthash.rPuuGWWs.dpuf To do this calculation, take your monthly income, such as Social Security, pension, monthly earnings off your nest egg and any other income streams. Then, divide it by the amount you expect to spend each month to live your life the way you want. Your goal, to be really rich, is to come up with a result that is greater than 1.For example, you might think Jennie, who is sitting on a $1 million retirement account, gets a $1,000 monthly pension and $1,800 monthly in Social Security, is pretty well off. After all, Moss figures, her $1 million retirement account ought to contribute $4,100 monthly if she takes 5 percent of that account annually and each month adds it to her income.

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