Tag Archives: expenses

8 Times my annual income?

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The other day my girlfriend asked me about an article she read stating that pre-retirees need to save 8 times their annual income in order to have a comfortable retirement. With the average income in the U.S. being just over $50,000 that means $400,000 in the nest egg. After the last few years we have been through economically, this figure may be hard to reach for many Americans.

My comment to her was; I prefer to look more at expenses vs. earnings. I want to know how my clients are living their lives + taxes and inflation. My average client is spending $30,000 so that would mean having a nest egg of $180,000 – $240,000 in reserves. Most of my clients do not wish to reverse their standard of living in retirement and that is why I like to look at their expenses vs. their current income. I want my clients to know that when the time comes to buy an airline ticket to their Grandchild’s graduation, they do not have to think about what they might have to give up to do so.

Financial planning should be done no less than 2 years prior to retirement. Call me today for your plan.

 

Disclosures:http://www.hechteffect.net/?page_id=31

My spending will go down when I retire.

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49% of people within three years of retirement believe that their spending will go down by half in retirement. Really? My experience has shown that is far from reality. Most people think they will spend less on travel, eating out, and see fewer doctors. My clients are living healthier and longer into retirement than past generations. They are not cutting back on travel or eating out. If anything, entertainment in all forms has increased for the retiree. So what is the solution?

You could retire at a later age. Many people I meet with today are still looking at age 62 or 65 for retirement. If that is pushed back to 66 or 70, the difference in their retirement can be significant. Those extra working years allows for more contributions to qualified retirement plan, a potentially larger social security benefit, reduced out of pocket expense from items such as health care because you will still be part of a corporate insurance plan, and lower monthly spending because you are working and do not have all of that free time.

Another option, though not the first choice, is to die before you run out of money. 60% of pre-retirees believe they only have a 25% chance of living beyond age 85. The reality: of married couples currently age 65, there is a 63% chance of at least one spouse living to age 90. So what can you do?

Plan and prepare at least three years before you pull the retirement trigger. We look at all of our client’s current expense plus taxes and inflation through age 90 when putting together a Retirement Analysis. We take a conservative approach to average annual total return throughout the years, and conduct regular reviews and updates. With this approach to Retirement Planning, we can try to stay ahead or on top of any surprises. Seek out a qualified Certified Financial Planner™ Professional and have a comprehensive Retirement Plan done before moving into your golden years.