Will I have enough to Retire?
Retirement Made simple
You might be wondering, “Will I have enough to retire?” Costs for medical care are on the rise. Household expenses have gone up as well. Of course, even the basics – like food and housing – those have increased in cost as well. So, how do you know if you’ll have enough? Let’s talk about some tools you can use to plan your retirement, and strategies that can help.
Inflation Calculator
It’s a good idea to consider inflation costs when planning for retirement. Inflation causes your dollar to be worth less in the future. In other words, it costs more to buy the same items years down the road versus now.
The goal that seems to be suggested is an inflation rate of about 2% annually. Saying that, most people will agree that between 2%-3% is a fair average rate for inflation. If you want to be more accurate, you can also use an inflation calculator, just one of many tools available to you when planning for retirement.
Doing The Math
Here’s an example. If you need $40,000 of income each year, and inflation is 2%, then next year you need an extra $800 just to cover the same expenses. In 5 years, that number jumps to $44,000. Then, at 10 years, you’d need almost $50,000 to buy the same items you bought 10 years earlier for $10k less. One of the important aspects of making a retirement strategy is to consider how much you’ll need in income now AND in the future. At Orfin and Associates, Inc., we tell you about various options, including optional benefit riders on fixed indexed annuities that may help. Indeed, we aim to help you keep a lifetime of income that provides for you even as inflation impacts your costs.
Tools for Budgeting in retirement
Another important piece of the retirement income puzzle: expenses. In our work with clients, we review your anticipated expenses as well as your current cost of living. Some people believe that they will be ok living on less. But it is important to try to budget for and document exactly how much money you’ll need.
There are some online budget calculators that can help you lay out your expenses and consequent income needs. Mostly, the aim is to make sure you have enough income to support your lifestyle and living costs in retirement.
Also, make sure you include any “extras” such as vacations, dining out, gift or charitable giving, etc. In addition, it is a good idea to pad your income with a surplus that can be used as discretionary income or used to save towards larger purchases. That way, if an emergency comes up, you have access to your money. Armed with this information, you can look at products that have a guaranteed* income feature, such as fixed index annuities (FIAs), as a possible retirement option.
Safety Could Be Your Best Tool
It may seem that secure retirement income options are becoming less available. Pensions have all but gone away in most organizations. In fact, most government employees need to put more into their private retirement accounts now than before. Yet, the payout when they retire still seems to hardly be enough. When retirement hits, some people’s needs are not satisfied with the amount they receive. CDs and traditional savings accounts have some protection, but the FDIC only covers up to $250,000 in accounts, depending on how they are identified. For example, you can’t just divide your money into different bank accounts at one bank to increase that coverage. Rules always apply. Further, the interest rate you receive may be less than desirable.
The stock market is inherently risky. There are, of course, ups and downs in the market. Therefore, having some of your money in a safe, secure choice, such as a fixed index annuity, could be something to consider. Keeping your principal safe from market loss is a tool many retirees find appealing.
Keeping Your Wealth Protected
For at least some of your assets, it is a good idea to review ways to secure the principal. If you keep some money safe from market loss, you’ll have some wealth that is secure. Because there are certain annuity options that offer protection from market loss, many retirees find these products useful tools in their strategy.
At Orfin and Associates Inc., we want you to have confidence in your retirement. In addition, we believe that protecting some of your assets from market loss is one of the best tools available. You deserve to know your choices and to make a plan that works for you.