How Much Will You Need to Retire?
How much money will it take for you to retire in style? If the question leaves you scratching your head, you’re not alone. Just 38% of American workers have talked with a financial professional about retirement planning.[1] One of the biggest risks retirees may face is running out of money while they’re alive. It’s an all-too-possible scenario, even if you have substantial assets.
There’s plenty you can do right now to determine what your ideal retirement is likely to cost, and plan accordingly. Start with a review of the key retirement income issues, such as:
Life Expectancy. Retirees today are living longer than ever. In fact, according to the Social Security Administration,[2] one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95—so it pays to aim high. You should anticipate living to 100, which is a reasonable number these days. It’s smarter to plan for a longer retirement and not get caught short.
Expenses. In general, retirees may need roughly 75% of their pre-retirement living expenses (adjusted annually for inflation) to retire comfortably. And long-term care insurance can help defray the often enormous custodial care costs that can devastate an income stream.
Your Portfolio. As part of the retirement planning process, we can estimate the average annual rate of return your savings and investments must earn to help meet your goals. Then, an optimal portfolio of investments will be crafted that takes the lowest level of risk necessary to earn that potential return.
Your withdrawal strategy. The amount of money you draw from your portfolio each year will have a huge impact on how long your nest egg lasts. The appropriate withdrawal rate varies for each investor but is generally estimated to be no more than 3% to 4% of your total. We can also talk about whether it’s best to tap any tax-deferred plans first or start taking income withdrawals from taxable accounts given your situation and goals.
Estate planning and philanthropic goals. Investors planning to gift assets either while alive or bequest assets upon death must factor in how their wealth transfer goals might affect their expenses and cash flow in retirement. Tools such as charitable trusts and insurance can help strike a balance between meeting current living expenses and providing for future objectives.
If you’re several years or decades away from retiring, saving and investing more aggressively now may help you build greater wealth over time. But remember, there is no assurance that a portfolio is guaranteed to achieve better results by assuming more risk. In the end, the process of mapping out your retirement income needs will give you an important benefit: the knowledge of where you are today, and what it will take to help obtain the retirement you desire.
At Krietzberg Wealth Management, we can help you plan for your retirement. Call us at 732-383-2064 when you're ready.
[1] Employee Benefit Research Institute, 2019 Retirement Confidence Survey Summary Report.
https://www.ebri.org/docs/default-source/rcs/2019-rcs/2019-rcs-short-report.pdf
[2] United States Social Security Administration, Benefits Planner | Life Expectancy, SSA.gov.
https://www.ssa.gov/planners/lifeexpectancy.html
The content of this material was provided to you by Lincoln Financial Advisors for its representatives and their clients. This article may be picked up by other publications under financial professional’s bylines. Curtis Krietzberg, David Krietzberg, and Felicia Garland are registered representatives of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. Krietzberg Wealth Management is not an affiliate of Lincoln Financial Advisors.
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