Part 3/7:
The Reality of Income Growth and Investment Returns
While the idea of salary growth at a steady rate of 3.5% annually might seem unrealistic given the stagnation seen over the past years, Lisa addresses the reality of promotions and pay rises that can significantly affect income over the years. The assumptions used in projections also consider an annual investment growth of 5%, a rate that, although slightly below historical averages, provides a practical framework for long-term financial planning.
In discussing pension planning, Lisa emphasizes a cautious approach towards anticipated growth rates and inflation forecasts. By modeling conservatively, she aims to ensure clients can celebrate unexpected growth rather than face disappointment in retirement.