Retirement is probably the biggest milestone of the second “half” of life. Some face it with great anticipation, but some also face it with a good deal of apprehension. Many have two central questions: How much money will I need? How do I even know how much money I’ll need?
In order to seriously consider these and other questions, it’s helpful to examine what retirement is like for most Americans today. For some people, retirement starts as early as 61i, although many report planning to work past that age. If we start from 61, however, the average life expectancy of someone who’s made it into their early sixties would mean an average of 23.3 years of retirementii. That’s quite a long time to plan for!
In those twenty-plus years, what kind of expenses should most people expect? Data from the Bureau of Labor Statistics provides a picture of what to expect. Older households, defined as ones headed by someone 65 or older, spend $46,000 annually, versus the $57,000 average spent by all U.S. households combined. The top three monthly expenses for those 65 and older are housing ($1,322), health care ($500), and food ($484).
If your initial glimpse indicates that you are in danger of outliving your retirement savings, one of the best steps is to postpone your retirement–an especially valuable tactic for those in their peak earning years. This approach would not only reduce the number of years you would have to live off of your savings, it would also allow investments more time to grow, as well as maximizing your Social Security benefit. Every year of postponement after your full Social Security benefit age (66 or 67, usually) means that your future monthly benefit will increase by as much as 8 percent annually until age 70.
So what steps can you take if you need to make up a shortfall between retirement income and expenses? The best advice is to get professional guidance. Ambassador Advisors is a great resource for protecting your assets and maximizing your wealth, especially as you approach retirement.
When preparing and evaluating a customized plan for you and your family, we might recommend a variety of tools designed to maximize your investments and minimize your tax liability. Once you arrive at retirement, withdrawal strategy becomes as important as investment strategy. Being tax-efficient and willing to ‘trim expenses’ in down years is essential. The common estimated ‘safe’ withdrawal rate for planning purposes is often 4%. This means you can likely withdraw that amount annually from a portfolio without depleting the financial reserves before you die. If possible, be flexible and withdraw less when the market is down or when you have reserves from stronger years. This simple approach will make your money last longer.
Call Ambassador today, and our professionals can help customize a strategy that works for you.
i According to a recent Gallup poll
ii According to the Centers for Disease Control and Prevention
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