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What to know about retirement now so you can plan for later

I recently spent some time with Penn and Kim Holderness discussing debt and savings and how to pay for college. I was happy to have the opportunity to join the Holderness Family Podcast again to do another financial segment that focused specifically on saving for retirement. They’ve been working with Protective Life to explore different financial topics ranging from how to manage debt to planning for college and retirement.

There are two things I believe everyone should know about saving for retirement. First, you must be proactive and plan. Hoping you will have enough money to retire is not a financial plan. I once read that most of us spend more time planning our annual vacation that may last a week or two than we do planning our retirement that could last 20 or more years. 

It’s always fun to sit down with Kim and Penn, and you can tell they are trained reporters in the way they try to pin down an exact answer. But it’s hard to come by exact answers for retirement planning because everyone is different. It would be easy if all the financial advisors got together and voted on the official amount of money you need to retire. As a financial advisor for the better part of 30 years, I know that can’t happen. So the next best thing a financial professional can do is to serve as a guide to help you determine what that number looks like for you. 

So, yes, there is a number, but it is more of a moving target than it is a magic number. But if you want to know how much you need to retire, the answer is a lot! Sounds daunting doesn’t it? 

Let’s break down the question about how much someone needs for retirement into manageable pieces. 

Inventory your assets

Take inventory of your assets that you have currently accumulated toward retirement.

  • What is your 401(k) balance?
  • How much money is in your IRA? 
  • What are your bank account balances? 

Do not include the value of your home unless you plan on selling it and using the proceeds to help fund your retirement. 

Set the variables

Next, you need to set the variables to be used for calculating investment returns, income taxes and inflation. This is a fancy way of saying – do your best to predict your future. We encourage the clients and advisors we work with to be very conservative in the variables they select. You may want to see multiple calculations using different assumptions for returns, taxes and inflation. Included with the variables you must decide upon what life expectancy to use for the calculations, again be conservative and use a longer life expectancy. 

Estimate your benefits

Go online to the Social Security Administration and obtain an estimate of your future Social Security Retirement Benefits. They have done a very nice job with their website, and I would encourage you to use it as another retirement planning resource. 

Determine retirement income

The final piece of information you will need in determining your retirement number is to state what your income goal is in retirement. In today’s dollars, is your goal $4,000 per month after tax, is it $10,000 per month after tax or is it some other income amount? 

DIY or seek guidance

With the data I outlined above in hand, a qualified financial advisor or an online retirement calculator can do cash flow modeling. Based upon the assumptions or variables you select, this cash flow model will calculate the capital or money needed to generate the desired retirement income. It will also guide you to what shortfall may exist and how much you need to be setting aside every month for retirement to avoid the calculated shortfall. 

Whether you engage a financial advisor or do it yourself, get to work and make a plan. Stuff happens and our lives can be forever changed in an instant by any number of events. Once you make your plan for retirement, monitor and review it annually.

Events that occur in our lives, in the world, in our country and in the economy will influence your plan. I like to use the example in a course I teach of an airplane and a pilot. If I board a commercial jet in Raleigh, NC and my destination is Los Angeles, CA, there is a good chance the pilot is going to adjust the airplane’s course along the way. The course adjustment might be due to turbulence, weather or other factors, but by the pilot making the adjustments I am confident that I will get to my destination. Your plan for retirement is no different. You may get blown off course and have to adjust your path, but if you monitor and review your course, you can have a higher degree of confidence that you will get to your destination – retirement. 


This material is for informational use only and does not constitute advice or the solicitation of any product or service.

Greg Patterson offers Advisory Services through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc. a Registered Broker/Dealer and Member FINRA/SIPC.

Advisors Financial Group, Inc. is independent of ProEquities, Inc.

Representatives may only conduct business with residents of the states for which they are properly registered.

ProEquities is a wholly owned subsidiary of Protective Life Corporation.


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