| Statistically you're going to live a long life. | | | | lower cost of living? |
| If you haven't started to think about your | | | | 5) Long Term Care Insurance. While it's impossible to |
| retirement, there is no better time than now to start. | | | | know how much long term care insurance will cost |
| For most, the average working career will last | | | | five, 10 or twenty years from now, you have to |
| approximately 40 years. With the advent of modern | | | | factor in the cost of long term care insurance into |
| medicine and technology, most can expect to live | | | | your retirement plans. Reach out to an insurance |
| another 25-30 years or more after retirement. | | | | agent who sells long term care insurance and you'll |
| According to the Center for Disease Control, if you | | | | able to see where the cost trends are headed. |
| make it to 65, you can expect to reach 83. If you're | | | | 6) Health care costs (always a big unknown) Will |
| married, there is a 66% chance, one of you will reach | | | | congress pass universal health care? Will Medicare |
| 85 and about a 40% chance you may reach 90. If | | | | even be available 20 years from now? If you are |
| you are in your 30's or 40s, I would plan expect to | | | | working, ask your human resources person what the |
| have a lifespan of perhaps 95 or 100. | | | | cost of health care cost would be for your situation |
| Saving for retirement may feel like an insurmountable | | | | unsubsidized. You can expect to pay somewhere in |
| task. For most people, they don't have a clue how | | | | the neighborhood of $360 per month for health care |
| much they will need to live on when retirement time | | | | insurance or more for a single person. If the cost of |
| comes knocking. The years roll by and before you | | | | health care rises just 6% annually, the cost may |
| know it, you've been too busy trying to get by and | | | | reach $720 per month or $8640 annually 12 years |
| you've failed to plan for your retirement. | | | | from now. |
| What will Social Security and health care costs be in | | | | 7) Hobbies /travel: Do you have any expensive |
| the future?Social Security and health care will be a | | | | hobbies or would you like to pursue a life of travel? |
| huge wild card when determining your retirement | | | | Fortunately air fare has remained fairly stable over |
| needs. If you have 10 to 20 years until retirement, | | | | the last 10 years. However, costs such as eating out, |
| there is no way to project what the costs will be. | | | | and entertainment have been rising over the last |
| Will the retirement age be changed? Will there be | | | | several years. Have you budgeted enough to have a |
| universal health care? What will social security | | | | good life in your retirement years? |
| payouts be a decade or two? Due to social security | | | | 8) What will be the status on social security when |
| being so far in debt and the crush of retirees | | | | you retire? To see how you can expect to receive |
| entering in the system, there will have to be some | | | | when you retire, go to the Social Security website |
| massive changes in the system. The retirement age | | | | The calculator on the site will give you an estimate of |
| will be raised, taxes will be raised or the amount of | | | | how much you can expect to receive depending on |
| payouts will be decreased. Perhaps all three will occur. | | | | when you take your retirement income. |
| So How Much Do I Need? | | | | How much can I withdraw while in retirement? |
| Determining how much you will need for retirement is | | | | Academic studies have shown that you will be able |
| not a simple answer, which is why I recommend you | | | | to withdraw 4% per year on an inflationary adjusted |
| utilize the services of a financial planner. The current | | | | basis without eroding your principal. If you are 65 |
| rule of retirement planning is to save 80% of your | | | | years old and have a retirement account of $1, |
| salary. This makes absolutely no sense. If you're 25 | | | | 000000, you can safely withdraw $40,000. While |
| and making $50,000, do you aim to have your | | | | $40,000 plus social security may seem like a livable |
| retirement plan generate $40,000? If your income | | | | wage today, there is always the specter of inflation |
| were just to keep up with inflation, you should be | | | | looming. Given an average 3% inflation rate, your |
| earning $100,000 by the time you reach the age of | | | | cost of living will double in 24 years. Your $40,000 in |
| 50. Do you then need to generate $80,000? To | | | | purchasing power will be cut in half to just roughly |
| make sure you are on pace to retire comfortably, | | | | $20,000. Could you live on $20,000 plus your social |
| you need to reverse engineer your retirement. Yes, | | | | security check? |
| there will be many wild cards and situations you can't | | | | If you are in the tiny minority of people who are |
| account for during your lifetime. Sit down for an hour | | | | eligible for a pension, congratulations! Pension payouts |
| and consider the following: | | | | will vary greatly depending on your earnings and |
| 1) Your current income and career choices. Will your | | | | years of service with the company you work for. |
| career path allow you to match the rate of inflation | | | | Should you be one of the lucky few, you should |
| or is there a possibility you can become upper | | | | account for pension money in your overall retirement. |
| management and make a six figure income in a few | | | | Check with your human resources manager regarding |
| years? Obviously, a very difficult question to answer | | | | your pension requirements. Remember, a company |
| if you are just starting your career. Your income | | | | pension is only available if there is a company in the |
| stream and investing early will weigh very heavily into | | | | future. Do not rely solely on your pension as |
| your successful retirement. | | | | retirement income. Just ask the employees of Enron. |
| 2) What will your investments earn? If you are 100% | | | | Envision Your Retirement Sit down and reverse |
| allocated in stocks, you can expect an 8-10% return | | | | engineer your life. Think about what your ideal |
| if you have a long time horizon. As you get closer to | | | | retirement situation would look like 10, 20, 30 years |
| retirement, you may have to reallocate your portfolio | | | | into the future. Would you like to dedicate your time |
| into a combination of stocks and bonds which will | | | | to a non-profit organization? Will you start a small |
| decrease your portfolio's volatility, but also your total | | | | business to augment your retirement income? Would |
| return. | | | | you like to travel and see the world? Do you envision |
| 3) If you own a home, will it be paid off upon your | | | | living in your home forever, or will you move to a |
| retirement? A home can be a great investment. Buy | | | | warmer climate? If you're planning a move, what do |
| a home now and your mortgage payment will be | | | | you think your rent/mortgage will be? Successful |
| exactly the same in 30 years (provided you don't | | | | businesses create a business plan; you should create |
| refinance). Investing in a house can be an excellent | | | | a "life plan." Make an honest assessment of your life |
| inflation hedge. | | | | and goals and do it now. |
| 4) Will you stay in that home or move to a new | | | | By being a consistent investor and creating a life plan, |
| locale in retirement? Will you keep your home long | | | | you will increase your chances of a successful |
| term or move? If you sell your home, the first | | | | retirement. Living the life you want in the future is all |
| $250,000 in profit (if you own one) is tax free. Will | | | | of about living within your means, making some |
| you reinvest that money or buy another home? If | | | | sacrifices today and planning for tomorrow. |
| your move takes you to a location, will you have a | | | | |