Retirement is supposed to be the golden years. However, today the issue of how much money you need in retirement is becoming a much more complex issue. Although it is important to save for retirement, you shouldn’t scrimp and deprive yourself for a retirement that may never happen. The big problem is running out of money while you are retired.
How Much Do I Need?
To start with, you must take into consideration what your financial assets are. Then you must develop a plan that is practical with regard to an individual or family with your assets.
On the other side of the balance sheet you must look into what your income will be in retirement. Do you have annuities? Do you have a pension? Do you have a 401(k) you can draw from? Will your only income be from Social Security benefits and returns on retirement investments?
If your living expenses during the term of your retirement are greater than your income, the only way of making ends meet is to draw down the principal of your savings and investments.
What Type of Investments?
Investing for long term income is the approach you should take with regard to retirement planning. This means you should avoid speculative investments. I suggest that you invest approximately 60-70% of your assets in income producing investments and the balance in dividend paying blue chip stock.
You should not assume that your investments will produce a seven, eight, nine or ten percent return. You should use a very conservative number of either a four or five percent total return on investments.
The Length of Your Retirement
Traditionally, Americans had been retiring between ages sixty and sixty-five. However, with greater life expectancy and smaller amounts of savings, many Americans are considering retiring at much older ages. If you retire at sixty-five you must take into consideration that you have enough assets to last you twenty-five or thirty years. However, if you retire at an older age, the term of your retirement will be shorter and the length of the payout in your investments will be shorter.
There are tricksters and scam artists who prey on senior citizens. Be careful with regard to investment advisors who promise high investment returns. If you are not sophisticated with regard to investments, you should find a well thought of investment advisor to help you. You should counterbalance the suggestions from your investment advisor with a certified public accountant.
Investing for retirement can be difficult. Hopefully you will be successful in accumulating enough money and investing it properly to actually have those golden years in retirement.
Elliot S. Schlissel is a member of the National Academy of Elder Law Attorneys. He assists his clients in all types of elder care issues related to medicaid planning, drafting wills and assisting the clients and their family members regarding probating of wills.