When To Retire, A Logical Approach Show 53
Have you ever made a decision you felt like was good, but it wasn’t logical? Sometimes we make decisions like this because we are tired of trying to make a decision. When I was 18, I wanted nothing more than to get out of the house and have freedom.
In high school, I went to a rigorous school that challenged even the most erudite students. Shamefully, what my grades reflected was that I’d rather be playing basketball, lifting weights, or cruising around in my Jeep. This created a dilemma for me. Stay at home and go to a local school or find one somewhere further away. I picked the later.
I was accepted and spent the first year of my college education at a school in Florida. What could be better? The beach was twenty minutes away and I could schedule classes where every Tuesday and Thursday I was done with school early enough to spend most of the afternoon at the beach.
This felt like a good decision but there was little mature logic involved in it, and I had plenty of freckles to show for it.My skin tone is such that I turn red like lobster, peel, and then turn really white again. Being at the beach year round when you and the sun don’t get along well isn’t the best decision. These days I’m the person in a big hat and long sleeves on the beach.
A logical way to determine if we can afford to retire, or if now is the right time, is to figure what your expenses are per month. Then we can work together to figure out how much income your retirement savings can generate for you per month.
Conventional wisdom is you want to be able to replace 70-80% of your current income in retirement or as close to 70% as possible. The reason you won’t need 100% of your current income is you typically won’t be saving money for retirement any longer.
If you’re over 65, some people find their health insurance cost go down due to Medicare kicking in, and you won’t have expenses like commuting to work or buying work supplies or clothing.
However, research indicates many people spend the most in retirement early in their retirement due to their aspirational expenses. For example, you may have planned for years to finally take that trip to Hawaii or Europe when you retire or maybe you plan to buy a boat.
As we age, we tend to spend less money except for our medical cost. Naturally, medical spending increases as we age.
So, how do we go about projecting how much income we can draw from our savings? With stock market investments, we can look at reports that indicate what has happened in the past.
However, what the future holds may not be similar to what has happened in the past. We’ve never had $28 trillion in national debt or so many unfunded obligations as a country. We also have a budget that hasn’t been balanced in twenty years. Using past performance of the stock market to indicate what we can expect to earn in the future may be problematic.
Remember, when we are working, we are in an income and accumulation phase. What this means is that we are planning to be invested for a long period and can wait for our money to come back from stock market corrections.
When we are getting ready to retire, or we are retired, we are in an income and distribution phase. The goal becomes figuring out how I can take consistent income off my accounts and make it last for as long as possible an ideally for the rest of my life?
For our stock market positions I believe it’s essential to have active management. How we do this is we have strategic partners actively managing portfolios with varying objectives. For many retirees the goal is to lessen the impact of major market gyrations. We look to match our portfolio managers up based on your goals and objectives.
It’s not a secret in our business that we use annuities as the bond alternative when we construct financial plans. By and large, bonds aren’t effective in today’s interest climate at providing fixed income. The correct annuity can provide bond like returns and have guaranteed principal protection. What that means is that the annuities we use are safer than bonds.
When you are able to use an annuity to provide for basic lifestyle expenses and know that that block money is insured against market losses, you are able to use the equity portion of your portfolio to grow your money. Thereby, allowing yourself a greater opportunity to keep up with our rising inflation environment
We’re not a fit for everyone, but we care about protection from both the sun and loss of principle. For many people we’ve been able to be the logical voice in their retirement planning decision. When you’re ready to learn more about how we may able to help you just reply to this email or call our office at 864.641.7955.
Until next week,
David C. Treece,
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Investing involves risk, including potential loss of principal. Any references to protection, safety, or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel.
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