After decades of work, easing into retirement can be an exciting time. But the luster can wear off quickly if you don‚Äôt have a good retirement-income plan already in place when those weekly paychecks stop ‚ÄĒ especially if your retirement savings and Social Security aren‚Äôt enough to cover expenses.
‚ÄúSome people retire with no income plan at all, but that‚Äôs like flying without GPS and still expecting to hit your target,‚ÄĚ said Jay Sharifi, an investment advisor at Legacy Wealth Management and author of Building a Better Legacy: Retirement Planning for Your Lifetime and Beyond.
‚ÄúMaybe they think since they‚Äôve saved some money, they will be okay. But saving money for retirement and planning your retirement are two different things. When you fly, you want to know exactly where you‚Äôre going and how you will get there. The same is true when you‚Äôre planning your retirement.‚ÄĚ
Sharifi said there is plenty of territory to cover when trying to work out how you will pay monthly bills, handle unexpected emergencies, and hopefully have some money left over for a little fun. But perhaps a good place to start is to ask yourself these three questions:
How much money do you need?
This can vary widely ‚ÄĒ and wildly ‚ÄĒ by the household. ‚ÄúThe general rule of thumb is that retirees will require 70 to 80 percent of their pre-retirement income to maintain their lifestyle,‚ÄĚ said Sharifi.
So, if you had an annual income of $100,000 pre-retirement, you need to shoot for about $80,000 in retirement. Once you decide what that number is, the key becomes matching your income need with the correct investment strategies, options, and tools to satisfy that need, he added.
How long does your money need to last?
The number-one fear that haunts retirees is the possibility they will outlive their money. It‚Äôs a legitimate concern because people are living longer than they used to ‚ÄĒ which means they need to stretch that money out to meet their life expectancy.
The average man in 1950 lived to be 65 and the average woman 71. Today, men are averaging about 19 additional years, and for women, it‚Äôs an extra 15 years, according to the Social Security Administration. ‚ÄúYou need to plan for at least 20 more years of income,‚ÄĚ added Sharifi.
What happens when life plans change?
Part of income planning involves taking into account what happens when one spouse gets sick or dies, potentially resulting in the loss of a pension check and definitely the loss of a Social Security check.
‚ÄúPoverty after the loss of a spouse is more common among women than men, which isn‚Äôt surprising since women live longer,‚ÄĚ Sharifi said. ‚ÄúThe income goes down, but the bills coming in remain the same.‚ÄĚ Retirees have a few options to alleviate this concern, such as life insurance plans, living benefit options and joint-income riders that can be purchased when designing an income portfolio. A financial professional also can provide advice on how to maximize Social Security benefits.
‚ÄúLeaving your retirement up to chance is inadvisable by nearly any standard, yet millions of people find themselves hoping for a happy ending instead of planning for one,‚ÄĚ said Sharifi. ‚ÄúWith information, tools and professional guidance, creating a successful retirement plan can put you in control of your financial management. And as a result, you won‚Äôt be flying blindly.‚ÄĚ
‚ÄĒInformation provided by News & Experts