Retirement Readiness

The Variables of Retirement Planning

There are several factors that shape the answer to the common question “How much money do I need to retire?”

The first one is your lifespan.  Most financial plans project income needs to your age 95.  So, if you retire at age 65, there will be 30 years where your savings and other income sources need to support you.  Conversely, an early death of a spouse will decrease your Social Security income, while other pension income could be reduced or terminate as well.

Another consideration is the escalating cost of health and personal care as you age.  Unexpected medical conditions may force you to retire earlier than you planned.  In later years, the need for care-at-home services or assisted living residences may require more money than anticipated.

Then there’s the economic landscape  --  inflation, taxes, and world events could affect your personal finances.  Markets go up and down and economic policies could negatively impact the purchasing power of your income.

All of these are unknown, but having a financial planning and investment team on your side can provide the analysis necessary to craft a retirement projection with a solid footing.

What are Your Sources of Income?

Understanding where your retirement income will come from and how it may be taxed is vitally important.

According to the Social Security Administration, the average monthly benefit for a retired worker as of November 2024 was about $1925.  The 2022 Bureau of Labor Statistics report cited the average income for a retired private industry worker was $48,780 before taxes.  Social Security and retirement plans accounted for 65.9% of pre-tax income. 

The Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2023 stated that 80% of retirees had one or more sources of private income.  This included 56% of retirees with income from a pension; 48% with interest, dividends, or rental income; and 33% with labor income.  For those that reported income from employment, the report suggested that those retirees were generally younger and many had a working spouse.  The median age of retirees whose family income included labor income was 66, compared with a median age of 69 for all retirees.

Manage Your Expenses

The 2022 Bureau of Labor Statistics study also revealed that the average household expenditures for retirees was $54,975.  Shelter was the top expense averaging $11,186 (20%)  and transportation was second at $8,065 (15%).  Not surprisingly, healthcare was third at $7,505 (14%).  Rounding out the top four was the food-at-home category at $4,938 (9%).

Keep in mind that no two households are alike.  Having an accurate accounting of your household expenses and personal retirement goals are paramount to creating a successful retirement plan.

Now is the Time to Become Retirement Ready

Working with a qualified financial planning and investment team can help alleviate uncertainty and give you confidence that you have a solid plan to meet your needs.  Contact us today to schedule a no-obligation meeting to learn more.