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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.

Sources of Retirement Income

  1. Social Security

  2. Traditional Pension

  3. Personal Savings & Investment

  4. Employment

  5. Housing Wealth

  6. Family and Community


But exactly how much is needed to get there ? The following questions may help you find the answer:

  • What does your retirement dream look like.

  • 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.

  • What is your life expectancy? The longer you live, the more years of retirement you'll have to fund.

  • What rate of growth can you expect from your savings now and during retirement? Be conservative when projecting rates of return.

  • 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.

  • What is your primary sources of retirement income and distribution models


Top Ten Reasons Why People Flunk Retirement

  1. Retired for the wrong reasons.

  2. Didn’t realize the emotional side of retiring.

  3. Didn’t know myself as well as I thought I did.

  4. Didn’t have a plan.

  5. Expected retirement to evolve on its own.

  6. Thought rest, leisure and recreation would be enough.

  7. Didn’t stay connected with society.

  8. Expected my partner to be my social life.

  9. Didn’t know what I was leaving behind.

  10. Was overcome with boredom.

Sapient CPA's Approach

  • Discuss assumptions with client (rates of return, inflation rate, income desired, life expectancy, pensions, inheritances, expenses, etc.)

  • Decide whether you will run a goals- or cash flow-based analysis

  • Discuss options if the plan "fails" (work longer, live on less income, work part-time, etc.)

  • Run a scenario with a 20% (or more) portfolio decline early in retirement

  • Determine the most efficient way to take distributions

  • Determine how and from where taxes will be paid and tax-efficient financial choices be considered

  • Set up a monitoring system for systematic withdrawals from an account (monitor holdings that are being tapped and cash level in account)

  • Monitor spending pattern with aggregated account softwar

  • Re-run financial independence plan annually

  • Take rising health care costs, travel expenses and human capital into account

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