The Rules of Retirement: Made to Fit
- 2 minutes
Whether retirement is a hop and a skip, or a long-distance haul, we’re all expecting to reach that finish line. All too often though, we fall into either idealism or denial. So let’s take off those lenses and get to the nitty-gritty: here’s what we’ll need to reach our destination.
Taking Your Measurements
Economic turmoil, cost of living, taxes, inflation, lifespan, health and wellness concerns—the components of a viable retirement “number” are wide and varied. Add to that questions of where to live, whether to continue working, how to spend/invest assets during retirement, and how to provide for future generations, all the while making sure that you’re cared for as long as you may live. How can such a number, swimming with variables, even begin to be calculated?
Online calculators and financial tools attempt to simplify things into rather elementary equations. And while no programmed ‘tool’ could ever replace face time with an advisor who knows you and your story, they can serve to provide a ballpark figure. Countless experts cite around 80% of pre-retirement income as the optimal sum to bring in during each year of retirement. Alternatively, it’s advised to save “10% to 15% of your gross income each year”. There’s also a crowd advocating a change from the traditional $1 million retirement goal, suggesting that $2 million is closer to ideal.
Generally, increased longevity, inflation, and anticipated Social Security decreases have motivated the shift. Regardless of the situation though, you’ll find that methods for honing in on an ideal retirement sum abound. In that vein, a word of caution: ‘rules of thumb’ are suggestions. Put simply, there is no “magic number”; every case is different.
Inexorably connected with your ideal retirement number, is how you’ll draw on that total during retirement. Scary stat: “77% of people over 40 don’t know how much of their nest egg they can spend annually without risking running out of funds.” There’s a debate out there over a balanced withdrawal rate, with most camps settling in the 3% or 4% range. But we understand why there’s such confusion—people hate crunching the numbers. And that’s precisely why you’d phone a friend on this one. Worry begets nothing but more worry; it’s best to take action and get some answers.
Leave Room For Expansion
In the end, your retirement is all about you. So while rules exist for a reason—to guide you on the path to a successful retirement savings goal—they must also be flexible, adjusting to personal circumstances. And while our differences may make planning a challenge, we can also see room for expansion, potential for growth. Retirement marks the first day of the rest of our lives. Far from a finish line, we’d call it a beginning of sorts.
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