10,000 Baby Boomers turn 65 every day. For the most part, this single largest segment of our population is not ready for retirement.
Here are 3 Retirement Questions You Need Answered Today.
How much retirement income do I need? Estimates range from 66% to 80% of current income. If your goal is to maintain your lifestyle, which is what I repeatedly hear, then you will need an amount equal to or greater than your current income. That may surprise you, but it shouldn’t. Because most, if not all, of your retirement assets are in tax-deferred accounts, your retirement income will be laden with taxes: federal, state and local. Factor in inflation and the answer is clear. To maintain your lifestyle in retirement you will need more income, not less. The long-term historical average for inflation in the U.S. is 3% and trying to project future income-tax brackets is a crapshoot. Factoring a 3-8% annual increase into your retirement income is a good place to start.
How long will I need my retirement income? You retire at age 65 with $1 million dollars, live modestly on $50,000 per year and die at age 75. If you knew you only had 10 years to live you could have taken $100,000 per year! The problem is we don’t know when we are going to die. Why do advisors illustrate retirement income between ages 65-95? Because that is what they have been trained to do. Why not incorporate a life expectancy report into the process? With some personal information, activity level and the answers to a couple of medical questions, we can estimate your life expectancy. Having a life expectancy of 75 may seem like bad news. On the other hand why not take more income and enjoy the time you have left?
What happens if I outlive my money? Without a doubt, this is one of the most pressing concerns on your mind. Longevity does not run in your family, but your life expectancy is 90. If you take more income you will surely run out of money. Not necessarily. You are familiar with Term Life Insurance. The death benefit is paid if you die before the term ends. What if there was a product that paid if you were alive at a certain age? Would that make you feel better? It should! I call it “Longevity Insurance”. At retirement, a policy is purchased that will continue your income for life should you live beyond a certain age. Note: Adding a Return of Premium Rider to the policy means if you don’t beat the odds and in fact do pass before the designated age, the money used to purchase the Longevity Insurance is returned to your estate. No harm, no foul!
Don’t want to work longer, save more or live on less? Go to www.jondaknows.com to schedule a financial review today.