What’s your strategy for retirement? Is it based on your unique needs and goals? Or is it based on general ideas and conventional retirement wisdom?
There are plenty of “experts” online offering retirement wisdom for the masses. In fact, if you search “retirement” on Google, you’ll find more than 880 million results with retirement tips and strategies.
The problem with retirement advice for the masses is that it’s not customized to your unique goals. There are plenty of pieces of conventional retirement wisdom that aren’t right for every person or situation. Below are two examples of common retirement income rules and tips that may not be right for you:
You should plan on taking 4% withdrawals from your savings to fund your retirement.
There are many “back-of-the-napkin” formulas meant to simplify retirement planning. One of the most common is the idea that you can take 4% of your assets as income in retirement. The idea is that if you withdraw 4% each year, your assets will last at least 25 years.
There are a few problems with this idea. The first is that not everyone will spend money the same way in retirement. You may want to travel or pursue other activities in the early years of retirement. Some people may need to provide support to children or grandchildren. And some will face costly healthcare issues. Not everyone’s spending is the same.
This rule also doesn’t account for inflation. It’s unlikely that your spending will stay the same year after year, making it unlikely that you can take the same withdrawal each year.
A better approach is to develop a custom budget and spending plan and then implement a strategy to meet your income needs. You also may want to consider financial vehicles like annuities that can provide guaranteed* income to help you meet your goal.
You will spend less in retirement than you do now.
Another common piece of retirement advice is that your spending will go down after you retire. Perhaps you’ve heard the idea to plan on spending 80% of your current spending in retirement.
Again, the problem with this advice is that your spending will differ from others. Many retirees see their spending increase after they stop working. They fill their free time with travel, shopping, dining out, and other activities that cost money. In the later years of retirement, you could see your medical expenses rise as you face healthcare issues.
You may see your spending in certain areas decline after retirement, but that doesn’t mean your overall spending will go down. Consider building a retirement budget that is specific to your goals and your plans. That will give you a better idea of how much you may spend in retirement.
Ready to develop a retirement income plan that is specific to your needs and goals? Let’s talk about it. Contact us today at Caprock Financial Group. We can help you estimate your income need and implement a strategy. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
