As you approach retirement, a critical question often emerges: How do I verify that my retirement savings can last throughout my golden years? At Emerj360, many of the clients we work with are seeking an answer to that exact question.
To help you make an accurate assessment, this article shares the insight we’ve learned.
Understanding Your Retirement Landscape
The first step is taking a realistic look at your current financial landscape and your future aspirations.
- Inventorying your assets: Take stock of all your retirement accounts: 401(k)s, IRAs, Roth IRAs, taxable brokerage accounts, pensions, and any other sources of income like Social Security. Knowing the total picture of your investable assets is the initial stage of understanding their potential.
- Considering inflation: When assessing your retirement savings, it’s important to understand that the purchasing power of money diminishes over time due to inflation. A dollar today won’t buy as much in 20 years. A robust retirement plan accounts for this erosion, verifying that your funds maintain their value throughout your golden years.
- Projecting your retirement lifestyle: Start by visualizing your ideal retirement. Will you stay in your current home, travel extensively, or pursue new ventures? Estimate your anticipated monthly expenses, factoring in housing, healthcare (a significant and often underestimated cost), travel, hobbies, and everyday living. Be honest with yourself about what you truly desire, as this forms the bedrock of your plan.
The “Longevity Risk” and Your Plan
One of the biggest anxieties for pre-retirees is longevity risk, which is the fear of outliving your money. With increasing life expectancies, your retirement could last 20, 30, or even 40 years. This makes careful planning strategies absolutely essential.
- Withdrawal rate strategy: A sustainable withdrawal rate is critical. Historically, a “4% rule” has been a common guideline, suggesting you can withdraw 4% of your portfolio’s value in the first year of retirement and adjust for inflation thereafter. However, this is a general rule, and your specific circumstances, risk tolerance, and portfolio composition dictate what’s sustainable for you.
- Understanding risk and return: Your investment portfolio needs to be strategically aligned with your time horizon and risk tolerance. As retirement nears, many of our clients shift from aggressive growth strategies to those that prioritize capital preservation while still offering some growth to combat inflation. Understanding the potential ups and downs of the market and how they might impact your ability to withdraw funds is key to financial confidence.
- Healthcare costs: This is a major variable that can quickly deplete savings if not properly planned. Beyond Medicare, consider the costs of supplemental insurance, prescription drugs, and potential long-term care. Ignoring these can significantly shorten the lifespan of your nest egg.
How a Financial Planner Can Help Verify the Longevity of Your Retirement Savings
The true value of a financial planner is in providing clarity and education during the critical period leading up to your retirement by providing the following services:
- Personalized planning: They pride themselves on offering a client-centric service, taking the time to truly understand each client’s unique situation, goals, and concerns.
- Fiduciary standard: If they’re a fiduciary, like Emerj360, they’re legally and ethically bound to always put a client’s interests first. This means their guidance is objective, transparent, and designed solely to help clients pursue their financial objectives, without the conflicts of interest often found in other consultative models.
- Bridging knowledge gaps: Many of their clients come to them seeking additional financial education, empowering each client with the knowledge and understanding to make informed decisions.
- Assessing “what ifs”: They help a client stress-test their retirement savings against various scenarios, such as market downturns, unexpected healthcare costs, or longer-than-expected longevity.
Take the Next Step
The question of whether your retirement savings can last is a valid and important one. The period leading up to retirement is vital for fine-tuning your strategy and making any necessary adjustments to confirm a safe and enjoyable retirement.
At Emerj360, our fiduciary approach to financial planning is designed to help you gain the clarity and confidence you need. Let’s work together to assess your retirement savings and build a robust plan that confirms that your nest egg supports the life you’ve always dreamed of.
Don’t leave your financial future to chance!
To schedule a meeting, call 833-637-5360 or book online here.
