Retirement Planning essentials

Retirement planning is ideally a lifelong process. You can start at any time, but it works best if you begin sooner than later. That’s the best way to insure a safe, secure, and enjoyable retirement. Retirement planning includes identifying sources of income, evaluating expenses, implementing a savings program, and managing both assets and risk. Future cash flows are estimated to gauge whether the retirement income goal will be achieved.

Retirement Planning Strategies should include the following: 

• Social Security Maximization and Medicare planning
• Required Minimum Distribution strategies for “Qualified” assets (401k’, 403b’s, SEP’s, etc.)
• Pension Maximization: maximize annuity distribution & offset spousal considerations
• Estate Planning
• Legacy Planning

Three Keys to Funding a Comfortable Retirement 

• Determine Your Needs
• Develop an Investment  Strategy
• Protect Your Nest Egg

 Factors That Influence Your Retirement Income Needs 

• Retirement  age
• Length  of retirement
• Health-care  needs
• Inflation
• Lifestyle

 Length of Retirement*

• At age 65, a healthy individual may expect to spend 20 years or longer in retirement.
• Males Chance of living to Age 85 = 63%, Age 90 = 43%
• Females chances of living to Age 85 = 72%. Age 90 = 53%
• You may need anywhere from 70% to 100% of your pre-retirement  income to live comfortably in retirement.

      ^{*Source:  Society of Actuaries, 2020}

Taxable investment vs Tax-Deferred Investment:

An initial $10,000 investment with a 6% annual rate of return applying a 24% tax rate over 30 year will grow

• Tax deferred = $57,435
• Taxed annually = $38,104

 Why Your Time Horizon and Risk Tolerance Matter 

• Stocks = 10.22% average annual return (expect long-term significant growth, but also significant short-term losses)
• Corporate bonds = 6.58% average annual return (less chance of loss, but with less growth than stocks over time
• T-Bills = 2.24% average annual return (low returns, little to no risk)

     ^{*reflects the past 25 years}

Start Saving Now

$3,000 annual investment with a 6% annual rate of return and Reinvestment of earnings

• Beginning at age 20 = $679,500
• Beginning at age 35 = $254,400
• Beginning at age 45 = $120,000

        ^{(Taxes not considered)}