Home Retirement Planning An Introduction to Income Per Percentiles and Its Effect on Retirement Distributions

An Introduction to Income Per Percentiles and Its Effect on Retirement Distributions

by gbaf

What is an income percentile? Well, it is the proportion of your income that goes to paying back your creditors. It is very important in determining whether you are living the high life or the low life. There are so many people who have absolutely no idea what this figure means. In order to clarify it, here are some things that will help you understand what it means:

A. What is the income percentile for a person? This percentage is basically determined by dividing the income of a person by their total debt. Divide the income by the total debt and this tells you the income that goes to servicing the debts. Now, if you are paying the minimum amount required under the debt payment schedule, you are living the high end lifestyle!

B. Why is this figure important? The income percentile tells you that a particular income bracket is not as good as the other brackets. If you are living in a bracket where you make a lot of money but also have to worry about paying monthly minimums, then you are in a very low income percentile! Therefore, it is important to keep your income in a median range so that you do not have to compromise over what you earn.

C. How do you get to know the income percentiles? Well, there are many different ways of knowing an income bracket. You can get this information from the tax department, real estate brokers, financial advisors and various other sources. However, one of the best ways to know your income percentile is to calculate your annual gross salary. This would give you an idea as to how much income you would need to cover your daily expenses.

D. Do income percentiles vary from one income bracket to another? No! There are income brackets where the income percentile ranges are different. There are some people who earn twice or even three times the number of others who make significantly less than others in the same income bracket.

E. How much money do you need to pay your bills each month? There is no set amount for the income percentile. You just need to calculate your expenses and then multiply that by the number of years you plan to live. Hence, if you earn fifty thousand dollars per year and you plan to make twenty-five years, you will not have to worry about an income percentile as high as forty, but you will need to pay an income of around nine thousand dollars per year.

F. How long do you plan to live in your income percentile bracket? This is another question that you need to answer very carefully. Most people want to live for as long as possible and pay as little as possible. However, if you are earning ten thousand dollars per year and you plan to live for twenty years, you will need to pay around twelve thousand dollars per year. Hence, it is imperative that you plan the same accurately before settling on an income percentile.

G. Who are your beneficiaries? The percentage of your income goes to your spouse or family. It also includes your dependants. Hence, if you have a college-educated son and a dependent daughter, both of whom are earning ten thousand dollars per year, you will have a higher income percentile than the one with a degree and a high-paying job. Similarly, people who have a college-educated son and a supporting daughter are likely to have a higher income bracket than the person with a high-paying job.


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