Are you really prepared for retirement? Truly prepared to transition from your monthly paycheck to living only on your savings?
One of the biggest issues facing retirees in the U.S. today is that many of us are living longer. You wouldn’t think this was a problem, but living is expensive and getting more expensive every year.
Healthcare and medications are constantly increasing
Basic living expenses are costing more as inflation pushes prices higher
A bag of groceries used to cost $10 and now costs $30
The price of a cup of coffee and a newspaper is ridiculous
Prices keep rising, and they are unlikely to stop. As time goes by, especially as a retiree living on a fixed income, you’ll need more money every year to stay ahead of the inexorable advance of inflation and remain financially secure, feel good about your life’s situation, meet your responsibilities, and be a blessing to your family and others.
The life expectancy for men of 65 is presently 84.3 years, and for a woman at 65, the average life expectancy is 86.6. Frankly, these numbers are ephemeral because with the advances in medical technology and pharmaceuticals, many people will live into their 90s and we’re likely to witness a surprising increase in the number of centenarians, of which you could very well be one!
This is great news if you have the resources to enjoy a life that extends into those advanced years. Clearly the question is how confident you feel about the ability of your 401(k) or pension, together with your Social Security benefits, to cover your living expenses in the future as prices for everything keep going up and up. Will your nest egg become too thin or even vanish? One of the biggest fears most seniors and retirees have is worrying that their nest egg will fall short and they’ll have to rely on their family or the government.
An unpleasant thought. Yes, you can always reduce the quality of your retirement lifestyle, and you can always work more years than you originally planned. These are unpleasant thoughts also.
This brings us to the main question: “What is your financial strategy for funding your comfortable retirement, the retirement you want to have?
Deciding how much money you need for retirement depends on the careful calculations of your financial planner. You may not realize it, but your financial planner is professionally trained to work with you in determining the exact cost of the retirement lifestyle you wish to live.
Once your lifestyle goals are identified, your financial planner can precisely calculate how much money this lifestyle will cost, extending the calculations through the decades to your 100th birthday or your 110th birthday. Then, working backward, your financial planner can calculate how much you will need for each of the intervening years, and by reverse engineering can arrive at the amount of money you need to have when you retire.
Remember also that even though you may not be physically working in your retirement years, you may also be able to secure steady income through your investments and revenue vehicles such as rental income.
The point is that now is a brilliant time to assess your current wealth and determine the amount of wealth you will need to claim the lifestyle you want in retirement. There is only so much time between today and the day you want to retire, and time is the greatest asset you have for building your financial wealth sufficiently.
Your financial planner will also identify the required rate of return (RRR) your combined investments need to achieve to reach the level of wealth that’s desired, and will help you build the best portfolio for reaching your RRR annually while also protecting your assets.
Do not delay! Make an appointment with a fee-based financial planner as soon as possible so you can make sure your retirement nest egg lasts as long as you do!
We hope this article about building the right-sized retirement nest egg for you was informative. Please contact us so we can review the possibilities for securing and increasing your personal wealth while enhancing your retirement.
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington 98104