There seems to be an endless supply of retirement planning advice. However, many people still have no idea if they are on track in preparing for a comfortable retirement. Generally individuals will need the assistance of a financial planner to help them accurately determine how much money they need to retire comfortably. Experienced financial planners use a variety of software programs to analyze and project possible financial outcomes.

The number #1 goal of most retirees is to make sure they have enough money when they retire so that they will never run out. Some retirees have secondary goals such as leaving a financial legacy for their heirs or donating money to certain charities. Developing a financial plan will force you to think through many important aspects of your future. Most people feel much more at ease about their financial future once they have a financial plan that can serve as a roadmap and reduce uncertainty.

You should have the following information with you when you meet with a financial planner in order to prepare meaningful and useful projections:

1. A list of your assets and liabilities - Be sure to include the balance as well as the type of account such as IRA, 401k, Trust account, Individual savings account, etc. You should include your home as an asset and your mortgage as a liability.
2. Estimate of needed Income – In the past many financial planners assumed that you would spend 70 – 90% of your pre-retirement income once you were retired. However, today’s retirees are enjoying longer more active retirements and spending more money as a result. Therefore, we generally recommend that you use 100% of your current income minus retirement plan contributions.

   For example:

   If you currently earn $ 100,000 but defer 10% into your company retirement plan, then you may want to plan on $ 90,000 as your needed retirement income. This is just a guideline. You may need more or less depending on a variety of factors such as; will you pay off your mortgage prior to retirement, how much do you plan to spend on travel, etc. Your income requirements need to be inflated each year to account for inflation.

3. Income Sources in Retirement – You need to have an estimate of your Social Security Benefits and Pension (if applicable). Does your pension have a cost of living adjustment?
4. One time Cash Inflows or Outflows – Are you going to be selling your residence and adding those funds to your investable assets? Do you plan to pay for a child’s wedding? One time inflows or outflows can have a big impact on your plans.
5. Other Assumptions – How long to you want the money to last. It is common to underestimate how long you will live. Do you want to plan for your money to last to age 85 or age 100? What rate of inflation should we project? Will you work part time in retirement?

Retirement planning involves gathering all of the information above, thinking about how you want to spend your retirement and then selecting the investments, insurance coverage and estate planning documents that will give you the highest probability of achieving your financial goals with the least amount of risk.

For questions related to Retirement Planning, please call Jeremy Kisner, CFP at 702-256-7400