The risk of outliving your money is a fear that many people close to or in retirement deal with on an ongoing basis. Although the risk of outliving personal savings and investment accounts has been a factor for people in the past it is becoming a greater issue for people who are nearing retirement today. One of the main reasons is obviously that people are living longer than they used to but other factors play an even bigger role.
Many companies used to offer pensions that would give their employee an income stream for the rest of their life. There are still companies that offer pensions but due to the cost of maintaining well-funded pension plan more and more companies have stopped the pensions and decided to go with a 40(k) option instead. A 401(k) work just fine but the main difference is that the pension put all the responsibility on the corporation while the 401k now leaves it all up to the individual employee. There are many companies that match a 401k contribution from the employee but in order to reach a stress-free retirement high savings rates would have to go into the 401(K) and then also good returns on the deposits would be needed.
Spend prudently/Save first
It’s difficult for most people to save enough and very often the low savings rate is a combination of spending too much before saving or due to lack of knowledge around how much money really is needed to create a comfortable retirement.
One of the greatest wealth building tools available is time so you need to start saving as early as possible. Building a prudently diversified portfolio that has time to grow is one of the best ways to combat not having enough for the golden retirement years.
How much do I need?
It is not truly possible to come with an exact dollar amount that is needed for someone’s specific retirement years. There are so many factors that play a role. What impact has inflation had on cost of goods and services? What lifestyle will you be wanting to have in retirement? Is social security still around and how much can be expected from social security? What is the cost of health care?
The best way to get started is to save a lot today and create an efficient plan where assets, debt, protection and cash flow works in perfect harmony. The only thing that is certain is that when you enter retirement without a pension, potentially without much in social security you need to save up a lot of money. There are many different thoughts on how much you can withdraw from lump sums of cash but as a rule you can probably expect to withdraw around 5% of your total savings and that could even be an aggressive figure. That means that $1,00,0000 will only provide you with $50,000 of income so if you want to live on more than $50,000 a year you better start savings and investing your money prudently. To get insight into how we manage our clients’ portfolios please contact or Hawaii office here.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Wealth Strategy Partners, LLC is not an affiliate or subsidiary of PAS or Guardian. This Material is Intended For General Public Use. By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. 2017-46749 Exp. 9/19