Why the 80% Rule for Retirement Income is Mostly Wrong.
One of the primary goals of retirement planning is to figure out how to use your retirement assets in the best way to generate the income you’ll need after you stop working. But to do this, it is important to have a pretty good idea as to the amount of income you’ll actually need. Estimating this is not a simple matter because there are so many things to consider. How much income will you need to pay your bills and essential living expenses? What amount do you want to spend for travel, pursuing hobbies and living your retirement dreams? How might your needs for income change over time as you age? What rate of inflation should you assume in your planning? These and other factors mean that the exact amount of income you’ll want to try to plan for is not static. Instead, it’s fluid and ever-changing. Therefore, establishing accurate future income targets is a complex, but necessary component to sound retirement income planning. A good financial advisor will typically spend hours, with the help of sophisticated computer programs to narrow all of this down to realistic lifetime income objectives. Once this is done, the planning job shifts to figuring out the best way to marshal all retirement assets so that they can produce this required income. But there are many so-called professionals out there who will tell you that it’s easy to cut through all this clutter and complexity by instead using a simple retirement rule of thumb. The advice is… “You’ll need 70 to 80 percent of the income you made in your final years of employment in order to live a comfortable retirement.” Well, that’s easy enough. Or is it?
3 Feb 2022
Safe Ways to Balance Risk and Reward for more Retirement Income
There is a very definite and unbreakable connection between risk and reward. Choose a financial instrument that helps provide greater potential returns, and you inevitably increase the degree that your money will be subject to investment loss. If instead you chose safety and protection over growth, expect the compromise of lower rates of return. Many retirees become frustrated as they search for the “perfect” investment that breaks this rigid risk and reward connection. Any time you hear of people getting taken advantage of and becoming the targets of fraud and financial abuse, it is typically because they wanted to believe there is some magical way to get high returns with no risk. Unfortunately, such excellence does not exist in the world of investing. And the more a person searches for this false perfection and refuses to recognize the unyielding relationship between risk and reward, the harder it will be to achieve retirement security.
27 Jan 2022
4 Steps to a Better Retirement Plan
4 Steps to a Better Retirement Plan
Do you have your retirement date set, or have you already retired? And how about your financial plan…. Do you have things squared away? Or are you still working on putting all the pieces together? Creating a financial plan for retirement can be a tough job. There are a lot of moving parts and a ton of uncertainty that you’ll have to consider. We want to help you with some easy tips that you can follow to create a better retirement plan.
These 4 areas of retirement planning are all areas that we see a certain level of misunderstanding. When we consult with clients and prospective clients each and every week, and in our daily discussions with retirees and pre-retirees, these are the areas that we see people simply get it wrong. So, today on the show we have identified 4 steps for you to take to make sure you create a better, more confident, financial plan!
You still need a paycheck during retirement to live comfortably. Some people will have Social Security and/or a pension. But most people won’t have enough of a paycheck to keep the same standard of living. And that group of people will be forced to take the supplemental income they need from their retirement savings nest egg. To understand your budget and income needs make sure your money is aligned with your objectives, and what your monthly income “shortfall” may be.
Once you understand your shortfall and how much income your retirement savings nest egg needs to generate. Then create an effective income withdrawal and investment strategy. This is the monthly paycheck that you need still after your Social Security check and/or pension check comes in. If you still don’t have enough monthly income after those income sources arrive because your budget calls for more, than you have a shortfall.
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