Are you one of the 59 percent of Americans concerned about retirement income? It’s an understandable concern, especially if you’ve gotten off to a late start in the planning process. The good news, though, is it’s never too late to start planning and saving for retirement income.
According to a recent survey from Gallup, Americans’ number one financial concern is that they won’t be able to afford retirement. 59 percent of respondents said they were more worried about retirement than any other financial issue, including things like being unable to pay for medical care and being unable to get out of debt.1
If you’re unsure of how to begin, check out the four-step process below. By following these steps, you can identify your biggest retirement income needs and develop a plan for how to overcome your most significant saving challenges.
1. Dream about your retirement.
That’s right. Your first step should be to dream about your retirement. Visualize what you will do on a daily basis and how you will spend your time. Will you travel? Will you spend time with family? Will you take up a new hobby?
Dreaming about retirement will help you determine which priorities are most important to you. When you identify your most important goals, put them down to paper. It may even be helpful to write out how you would spend your ideal day in retirement. You can use those dreams and goals to build out a very important document - your retirement budget.
2. Estimate your income.
Once you’ve created a budget, you know how much income you need in retirement. The next step is to determine how much income you have. Make an inventory of all of your potential income sources. These could include things like Social Security, pension income, withdrawals from savings, part-time work and more.
Estimate the amounts of each income source. You can use Social Security’s online estimator tool to project that stream of income. If you have a pension, your benefits department should be able to provide you with payment estimates.
Now compare the sum of your income sources with your total projected expenses. Is your projected income greater than your estimated expenses? If so, you may be in good shape for retirement. If not, though, you may need to reevaluate your budget, consider working longer or look for additional income sources.
3. Develop your budget.
Having a budget is always important, but it may be even more important in retirement. If you’re concerned about running out of money in retirement, then a budget should give you the information and data you need to prevent that from happening.
A budget tells you how much money you need to support your lifestyle. It also shows you the areas in which you may be overspending and where you may need to make some adjustments.
When you create your budget, most of your expenses will fall into two groups: fixed and discretionary. Fixed expenses are those that have to be paid every month. They include things like housing, utilities, loan payments and food.
Discretionary expenses are those with which you may have more flexibility. They include things like travel, hobbies, shopping and dining out. These are the expenses you may want to have in your life, but may have to adjust if you don’t have sufficient income.
Add up the total of your fixed and discretionary expenses. That number will tell you how much income you need to support your lifestyle in retirement. That’s an important piece of information to have before you move on to the next step.
4. Create a plan.
The final step is to create a retirement income plan. What steps do you need to take to ensure a financially successful retirement? If you have gaps between your income and expenses, consider whether you can step up your savings to overcome that gap by the time you retire.
How much do you need to save? And what kind of rate of return do you need to get to grow those savings? Does your current allocation provide you a realistic opportunity to grow your assets sufficiently? Does it expose you to too much risk?
These are the types of questions that can be answered with a written retirement income plan. Your financial professional can help you develop your income plan. Implement your retirement income plan to overcome your income challenges and to enjoy the kind of retirement you’ve always imagined.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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