When Should I Retire?

Few decisions in your life are as complex and fraught with significant consequences as the decision on when to retire. For most of us, this decision will affect more than just ourselves. Your decision cannot be made in a vacuum if you have a significant other, spouse, or others that depend on your paycheck. Many will consider issues such as the size of their retirement and investment portfolios, age, physical health, and the state of the economy. Still, others look to stagnation and boredom with their careers, the availability of a pension or social security, or even an inheritance.

Many books have been written about retirement and there is a wide spectrum of opinion on when people should retire, especially given that people are generally living longer. It was not so long ago that people rarely lived into their 70’s. Today, it is common for people to live to their 90’s or beyond. The fact that our lifespans are increasing with advances in medicine and technology begs the question: should we retire at all?

A very large segment of the country retires at age 62, which coincidentally is the earliest age you can qualify for social security retirement benefits. However, for the eager beavers who decide to do so, they should know that those benefits could potentially be permanently reduced by about 25 percent. For someone who might be around until age 92, that’s a lot of income to forgo. It is possible you may spend three decades in retirement. What the heck are you going to do with yourself for all those years? Visit the grand-kids, play golf, or work in the garden?

Before you even consider the idea of when to retire, engage the services of a financial and retirement income advisor team. Ideally, you will want to work with individuals who have decades of experience working with people similar to you. You will want to look for someone who is not close to retiring themselves.  Imagine how hard it could be to find someone you can trust 10 years from now when your advisor retires.  That is the last thing you will want to do while enjoying your Golden Years.

With all this said, remember that the decision as to when to retire does not just affect you. Your loved ones deserve to be part of the conversation and the decision-making process. Make sure your planning takes into account the financial aspect of retirement and also the life and living parts. You may have bid your spouse goodbye five days a week at 8:00 am for decades. But when that stops, things will change. That change may be for the better or worse, and you need to plan for that, too.

 

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How do I know if my money will last when I retire?

This is one of the most important questions, if not THE most important, that retirees need to ask themselves before taking the plunge.  If one leaves the workforce completely the paychecks stop and they are left to rely on their savings, social security and possibly a pension.  Those without a pension need to be even more careful, especially if they want or intend to spend more each month than social security provides.  This spending can only come from one place, their savings.

Figuring out how long your money will last in retirement has stumped many.  There are a lot of assumptions and variables that could go in that calculation.  The first being, how long will you live?  Nobody knows that answer…so that’s our first assumption.  You could work off of statistics, off of family health history, neither or both.  For most married couples, I recommend assuming at least one person will make it to 95.  Modern medicine is amazing.  Some people live longer than they thought, and are more active at later ages than they ever thought they would be.  So choose this number wisely, and to be safe, maybe add 5 years to your guess.

The next big question is what will stuff cost 5, 10, 20, 30 years from now.  30 years ago the cost of a new car averaged $6,294 and today they average $26,700.  A gallon of milk was $1.94 and now the average is $3.52*.  Many people forget to account for the rising cost of goods and services.

Many economists say you should consider having to take out an additional 3% to 4% per year.  So, for example, if you pull out $1,000 a month from your savings this year, plan to take out $1,030 or $1,040 a month next year.  Then 3% or 4% of that amount the next year…and on and on you go.

Lastly, you need to determine a “safe” withdrawal rate.  This is how much you can spend each year from your savings and not run out of money.  This can vary a lot from family to family so please be careful on this step.

Please don’t take this process lightly and by all means, consult with a professional if you feel you can’t do an unbiased assessment yourself.

*Source: http://www.inthe80s.com/prices.shtml

2011359 /DOFU 1-2018

Assets vs Income

Generally speaking, stock brokers, money managers and most investors are hard-wired to seek growth.  Appreciation of stocks and one’s portfolio seems to be priority #1.

But when it comes to producing INCOME from those assets, a whole new set of skills is needed.  There are different tools, different risks, and different objectives.  Asset accumulation is NOT income optimization.

You need a different set of skills to pursue income maximizing strategies.  Moving from accumulation to decumulation – the orderly draw-down of assets – can be aided by a retirement INCOME expert.

In my book, How to Turn a Lifetime of Savings into Income for Life, I detail several different kinds of retirement income strategies available, and how they address the range of risks one may face in retirement. To get your copy, go to the top of the page and on the right hand side you can request one be emailed or mailed to you.

2003141/DOFU 1-2018