Planning for Retirement
FACT - Retirement is expensive. Experts estimate that you will need at least 70 percent of your preretirement income – lower earners, 90 percent or more – to maintain your standard of living when you stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead. The average American spends roughly 20 years in retirement.
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Sources of Retirement Income
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Social Security
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Traditional Pension
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Personal Savings & Investment
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Employment
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Housing Wealth
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Family and Community
But exactly how much is needed to get there ? The following questions may help you find the answer:
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What does your retirement dream look like.
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At what age do you plan to retire? The younger you retire, the longer your retirement will be, and the more money you'll need to carry you through it.
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What is your life expectancy? The longer you live, the more years of retirement you'll have to fund.
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What rate of growth can you expect from your savings now and during retirement? Be conservative when projecting rates of return.
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Do you expect to dip into your principal? If so, you may deplete your savings faster than if you just live off investment earnings. Build in a cushion to guard against these risks.
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What is your primary sources of retirement income and distribution models
Top Ten Reasons Why People Flunk Retirement
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Retired for the wrong reasons.
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Didn’t realize the emotional side of retiring.
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Didn’t know myself as well as I thought I did.
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Didn’t have a plan.
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Expected retirement to evolve on its own.
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Thought rest, leisure and recreation would be enough.
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Didn’t stay connected with society.
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Expected my partner to be my social life.
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Didn’t know what I was leaving behind.
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Was overcome with boredom.
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Sapient CPA's Approach
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Discuss assumptions with client (rates of return, inflation rate, income desired, life expectancy, pensions, inheritances, expenses, etc.)
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Decide whether you will run a goals- or cash flow-based analysis
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Discuss options if the plan "fails" (work longer, live on less income, work part-time, etc.)
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Run a scenario with a 20% (or more) portfolio decline early in retirement
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Determine the most efficient way to take distributions
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Determine how and from where taxes will be paid and tax-efficient financial choices be considered
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Set up a monitoring system for systematic withdrawals from an account (monitor holdings that are being tapped and cash level in account)
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Monitor spending pattern with aggregated account softwar
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Re-run financial independence plan annually
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Take rising health care costs, travel expenses and human capital into account
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