There are many unknowns in retirement. How long will your money last? How will you pay for unexpected medical and long-term care costs should the need arise? Many people who are approaching retirement or who have recently retired have some confusion, and possibly a bit of fear, about these and other questions.
At Absolute Retirement Solutions, we assist people with personalized retirement strategies and products designed to help them use what they’ve saved wisely. When we meet with new clients who are close to retirement or recently retired, these are three of the most common questions they ask at their first appointment.
- How much money do I need to retire?
While there are many online calculators that can estimate your retirement savings needs, most are far too simplified to offer an accurate number. There are many factors that will determine how much you need to save to retire and they depend on your unique financial situation as wells as your plans for retirement. Your life expectancy (which is also impacted by many factors) also plays a role in your ideal retirement savings amount.
The first step in calculating your personal estimate is determining your living expenses, which may change compared to what you spend now. You may downsize your home to spend less on housing but spend more on travel in retirement. It may be easiest to calculate your estimated monthly expenses and multiply by 12. If you have other periodic expenses, such as property taxes or annual payments for insurance or other items, be sure to account for these as well.
Then, you need to determine your guaranteed income and subtract the difference. For example, if you find that you will need $60,000 per year to meet your projected expenses and you have a guaranteed income of $20,000 per year, you will have to withdraw $40,000 per year from your retirement savings and investment accounts.
- When should I start receiving Social Security benefits?
The answer to this question also depends on many variables. When you decide to start claiming will impact the amount you receive, permanently. You can start taking Social Security as early as age 62, but your benefits will be greatly reduced. 67 is the full retirement age for anyone born after 1960. You can get an extra 8% per year by waiting until age 70 to start taking benefits. Your decision should be based on how Social Security will factor into your overall retirement income plan.
- Should I purchase an annuity?
Annuities are a popular financial product for many retirees. They are used as a way to create a steady stream of retirement income that is protected from market declines. There are many different types of annuities that may or may not be beneficial depending on your individual goals and circumstances. If you are looking for a conservative strategy for producing long-term or even lifetime guaranteed income to supplement other incomes in retirement, you may want to speak to someone about purchasing an annuity.
Because none of these common questions have clear objective answers, the best thing to do is consult with an experienced retirement professional. The sooner you create your strategy and the more you monitor it, the better chance you have of achieving your financial goals in retirement. Contact Absolute Retirement Solutions today to meet with a professional in the Kansas City area.