18 | December 2018 | Real Hero Report
Are You Underestimating Your
Retirement Income Needs?
How much money is enough to allow you to retire? Too
often, people fail to address this question until they’re
nearing retirement, only to discover that they must adjust
their expectations for their retirement lifestyle to the realities of their
financial situation.
The retirement landscape is changing too. Pensions in the corporate
world are becoming almost nonexistent, and the new military
retirement system relies on member contributions more than in the
past.
Estimating how much you’ll need for a comfortable retirement can
be challenging, and there’s no simple rule for reaching a magic number.
For many years, experts suggested planning to live on 70 to 80 percent
of your pre-retirement income. But that estimate, which assumes a
fairly short, sedentary retirement with low fixed costs, may no longer be
appropriate.
Today, retirees are living longer, more active lives and must account
for more years in retirement. As a result, many experts suggest they
should plan on replacing 100 percent or more of their pre-retirement
income. And that income is likely to be needed for a longer period of
time, too. For a married couple reaching 65 years of age, there is a 50
percent chance that one partner will live to 92 years.
In the past, a retirement nest egg of $1 million was associated with a
life of luxury. But that’s no longer the case. Most planners suggest that
retirees should not withdraw more than 4 or 5 percent of their principal
each year. Even for someone with a $1 million portfolio, that only
translates to $40,000 or $50,000 in annual income.
For all of these reasons, it’s never been more important to sufficiently
prepare for retirement. To determine if you are on the right track, you’ll
need to address questions such as:
contributions?
Yes, it’s a lengthy list. But it’s far better to begin assembling a clear
and realistic picture of what you want your retirement to look like–and
what you need to do to make that happen–now than it is to wait until
the last minute.
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