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“How to Know What I Need in Retirement”

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Let’s share some ideas about what you’ll need for retirement.

Do you get that foggy brain feeling when you think about what you will need in retirement? Does the feeling get worse and keep you awake at night when you consider all the unknown variables of some far-away hazy date?


You are not alone. Preparing for retirement is one of the top concerns of most women over age 50, but it does not have to be a dirge.


What if it can be easy?


When you decide to take a few steps toward understanding “what” you will need, then the “how” begins to show up.


Here are 4 Easy Steps you can take.

You will receive greater clarity and more confidence that you are on the right track!

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Income Needs – Do an easy estimate

An easy way to estimate your retirement income needs is to do a simple calculation. Its called the “income replacement rate”. Simply it’s the percentage of your current income level that you could comfortably live on. The answer is based on your estimated expenses, your discretionary income, and your personal financial situation.


For example, if you are earning $100,000 per year and retiring at age 65, your retirement income replacement rate may be 80%. You may have some discretionary income that you can use while you cut back on your spending. You may also have private pensions that can help your retirement savings.


To find your retirement income replacement rate, the AARP website has a calculator that can help you plan for retirement. For example, the calculator calculates the retirement income replacement rate and the minimum income replacement needs.


Account for unexpected expenses

Creating an emergency savings account is a great way to protect yourself from unexpected expenses. However, there are plenty of things to consider when deciding how much to save. The amount you set aside is up to you, but a basic emergency fund should be three to six months of living expenses.


To make it easier on yourself, you should set aside money every year. You can reserve this money in a savings account or even a tax-deferred retirement account. However, you will need to replenish this fund after you use it.


One of the biggest unexpected expenses retirees face is health care. Medical costs can add up quickly, but if you have a fund to cushion you, you will be retiring with an easy, graceful feeling.



Prepare for inflation

Whether you are thinking about retiring or have already retired, preparing for inflation is a critical part of a successful retirement. This is particularly true if you are planning to rely on investment income to help fund your retirement.


Inflation affects the purchasing power of all money. It increases the cost of goods and services in the short term, and it affects the value of the money you have set aside for the future.


If you are worried about inflation and your retirement, check with your advisor or contact me to help review your investments. A diversified portfolio can help offset inflation risk.


You should also consider the possibility of inflation impacting your Social Security benefits. The federal government uses inflation as a benchmark when it decides to raise monthly Social Security benefits. However, this is not guaranteed to continue.


If you believe inflation will continue to be a problem, update your financial plan and revise your assumptions. Also, be sure to regularly check your investments.


Adjust your spending assumptions

Whether you’re a new retiree or you’re just trying to get a sense of how much you’ll need to spend, it’s important to adjust your spending assumptions for retirement. Can you afford your current level of spending? What adjustments will you need to make in living arrangements, or expenditures on travel and entertainment, for example? This will help you decide when to retire, how much you need to save, and whether you’ll be able to make ends meet during your retirement years.


financial peace of mindThere are a few common rules of thumb to help you determine your spending assumptions for retirement. One of the most common is the 4% rule. It’s a rule of thumb that assumes you’ll increase your spending each year by 4%, regardless of the performance of the markets.


Whether or not you’re using a 4% rule to determine your spending assumptions for retirement, it’s a good idea to estimate your inflation rate. Inflation decreases the buying power of your money over time. The rate should be lower than the return on your investments.



Retire with peace of mind

Remember, the more clarity you create now, the greater your chances of being prepared for retirement. Taking these 4 easy steps now will go a long way toward building the financial peace of mind that you want and deserve! Got Questions? Contact Me!


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DISCLAIMER: This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice. Investing involves risk, including possible loss of principal. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness.