Money Matters – Preparing for Retirement – What You Can Do Now

 Two out of five investors believe their retirement savings goals will be difficult or nearly impossible to reach, according to a survey of clients taken by a large financial institution. Part of that pessimism may stem from not being sure what it takes to fund a comfortable retirement. If only you had a million dollars, right? But it’s not always that simple. What you’ll need in retirement is a highly personal question. Some people can live like royalty on $1 million, but for others, it might not be enough. The reality is that even a big number like that could fall short during a retirement that may last 30 years — especially when you factor in inflation, which is currently at about two percent.
Still, planning your retirement goes beyond aiming for a particular dollar amount; it’s also about your individual goals and aspirations, both now and after you retire. Everyone’s financial life is different, and your plans for retirement are only one part of the equation. Understanding how much annual retirement income you can expect from your investments is key. Because while a retirement account that looks large on your monthly statement might seem impressive, the income it generates may not last through decades of retirement.
Calculating what you’ll need and estimating your retirement income needs is not an exact science or a once-and-done process. Your needs — as well as your vision for retirement — will evolve, and your portfolio performance will affect how much money you have to work with. There are several good retirement estimators out there that can give you a good idea of how your projected retirement income stacks up against what you may need. These retirement programs will ask you for some personal information, including: planned retirement age; Social Security income; current retirement savings; investment style; comfort with risk; etc.
Once you’ve entered your personal data, these programs will show you:
• What your nest egg may potentially provide in monthly and annual retirement income. Your projected expenses in retirement and whether you may fall short of your income needs
The first time you use the calculator, the results may show a sizable gap between the income amount you are projected to have and what you may need. That’s extremely common. Fortunately, there are ways to course-correct. For example, you may be able to use other income sources (such as pensions or part-time work) or increase your retirement savings contributions before you retire.
Look for opportunities to help close the gap If you need to do a better job of aligning your needs to your financial resources, there are several steps you might take. Many of these variables are included in these retirement calculators so you can adjust the input information and rework the calculations to see what strategies might get you where you need to be.
No matter what your current retirement savings and life stage is, there are things you can do to be better prepared for retirement.
• Review all current retirement accounts.
• Consider investment changes within those accounts.
• Run the #’s on when (what age) to take social security.
• Prepare a detailed expense report (spread sheet) of what your current monthly expenses are.
• Prepare a detailed anticipated expense report on what you anticipate you will need in monthly income from your savings, investment accounts, pension, social security, etc. to live a comfortable life.
My wife and I did the last two exercises, separately, and then compared our notes. We were:
• Shocked as to how much we have to make to live within our current lifestyle parameters and save for retirement.
• We were amazed how close we were (less than $400 apart) in deciding what type of income we needed to have to live a relatively comfortable lifestyle in retirement.
Getting a sense of your retirement numbers can reduce your uncertainty about the future. But planning your retirement is about more than numbers. No matter what your current retirement savings and life stage, there are things you can do to be better prepared for retirement.
Bottom Line: The most important thing is to put time on your side by acting now!
For more information, please call Douglas J. Sedam at 1-866-549-3900, 661-295-2400 #1 or email: Doug.Sedam@ThePaseoGroup.com. You may also learn more at www.ThePaseoGroup.com.
Securities and Investment Advisory Services offered through Western International Securities which is a member FINRA/SIPC. OSJ Office: 19510 Ventura Boulevard #211 Tarzana CA 91356 818-996-3375 The Paseo Financial Group, Inc. and Western International Securities are unaffiliated companies.