Retire Comfortable with an Income for Life
Your old concepts of what retirement is supposed to be are gone. And there are no current paradigms that are working well. Retirees need to start to think outside the box if they want to ensure they will have an income for life.
In the past a patchwork of a variety of retirement plans, IRAs, some annuities, an employer’s pension plan, maybe an insurance policy, and social security was enough to provide an adequate income for life. The days of financial guarantees are over. Any investments have become unreliable and our government has turned social security into a political football. Tax laws are changing every year and the general economy is volatile.
Most experts say that to retire comfortable with an income for life you should plan on having an income of seventy percent of your preretirement income. If you have your home paid for, you are in good health, and plan on living out your days comfortably in your current home, that might be enough. However, if you want to travel or do any of a hundred things you have been putting off, that seventy percent is likely not to be enough. You will want a hundred percent or more of your preretirement income to live your life to the fullest.
To get a realistic idea of what it will take to have an income for life you need to figure out all of your expenses. You will have to be brutally honest with yourself when calculating these figures. Fudging the figures isn’t going to make them go away in real life. You will also want to add in some extra for the unexpected that seems to happen in everyone’s life.
To begin your retirement calculations for your income for life you can start with your current expenses. Will your home be paid for by the time you retire? Your commuting expenses will diminish as will your need for a work wardrobe. However, your healthcare costs are likely to increase. What will you be getting from social security? According to recent surveys social security alone will not be enough to live on. You can check your estimated social security benefits with the government’s calculator. From there you can figure out what additional monies you will need to supplement your income.
You will need to look at a mix of not only stocks and bonds, but also other things that are maybe not so easily understood like longevity insurance, immediate annuities, fixed and index annuities, or variable annuities. All of this goes into creating an income for life. If you need help understanding these unfamiliar terms there is a library of books available, and there is always the internet. There is also software available to help you manage your money so that you can accomplish all of your goals.
In general people are living longer and the fear of outliving their investments is more of a reality. And even with all of the retirement income products available there isn’t one that is the silver bullet to a comfortable retirement. Each of the programs has strengths and weaknesses. What you want to find is the program that best matches your needs. The goal of any retirement program is the same; get you the retirement money you need to continue at least your current lifestyle. How those programs get you there can be very different. Your job as an investor is to determine what products mix you will feel the most comfortable. Ultimately what you will have to do is decide what retirement income you want and then select the products that will get you there.
There will likely be tradeoffs and you will need to understand what those are. Building the best retirement portfolio for you will require you to consider your gender, any health concerns you may have, expected lifespan, at what age you want to retire, how comfortable you are with risks within your portfolio, and if you want to leave an inheritance to your children. The sooner you start to make these plans the better. Far too many baby boomers are finding themselves in the position of catching up. Whether it is from poor planning to unexpected job losses many Americans are finding the golden years to be a bit tarnished. What you may have expected retirement to look like has probably changed significantly. Being able to adjust to those changes will be the determining factor in whether or not you will have an income for life.