Champagne Tastes – Beer Budget: Tips for Planning Your Retirement

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By Melanie Hasty-Grant

Champagne Tastes – Beer Budget: Tips for Planning Your Retirement

When it comes to planning for retirement, you best not be caught with your pants down! The sooner you get started saving and planning for retirement the better. So many times I hearpeople say… “I just can’t afford to put money back for retirement.” Listen here, you can’t afford NOT to!

The question is, how much should you be saving? A good rule of thumb is to save 20 times your expected annual expenses in the first year you plan to retire. This rule is based on spending – not income – and as such, is an important distinction from income-based rules.

In retirement what matters is how much you spend – not how much you used to earn. The 20 times rule is based on first estimating expenses after subtracting any pension and Social Security payments. Assuming a retirement of about 20 years, this nest egg would let you spend 5% of the balance while investing the remainder at modest rates of return.

For example, if you and your spouse think you will need $50,000 a year and plan on $20,000 from Social Security, you would need 20 times 30,000 or $600,000. For a more conservative approach, estimate this rule of thumb based on 25 times annual spending.

Now, I have been listening to folks’ problems and solving financial equations for over 20 years. Some of the common themes that I hear are the following:

  • This is not your parents’ retirement. A lot of folks remember their parents retiring and living comfortably off of primarily Social Security and company pensions. Therefore, they really don’t have a model for the importance of putting back for their own retirement. In addition, 30 years ago retirement didn’t typically last too long. The life expectancy didn’t go far beyond the age of 70. Your retirement will be very different. You will live longer and you will likely be more active.
  • Don’t depend on Social Security and Company Pensions. As of 2004, the average annual Social Security retirement benefit was approximately $11,000. In other words, retirees cannot live on  Social Security alone. For those in or near retirement, your benefits are pretty safe. However, for the younger crowd, don’t count on receiving all of the benefit estimated in the statement sent to you by the Social Security Administration every year, three months before your birthday. Company Pensions: The number of companies offering pensions is currently around 20%. This is down from 40% in 1975. Unless you are one of the lucky one in five, plan on saving your retirement money yourself.
  • So Bottom Line: It’s up to you! Unless your plan is to die young or to work forever, you need to stop “playing possum” about your retirement savings. It’s time to stop being a worry wart about it and start doing something about it. Take control of the one thing you have control over in planning for your retirement -YOU. How much YOU save, how YOU invest that savings, and how YOU protect and grow that savings in retirement is what you can control. Who you trust to help you with this process matters. Make hay while the sun shines!

For more information go to www.waterstonewealth.com or call 918-272-1120.

Melanie Hasty-Grant, Experienced Licensed Professional Counselor and Founding Partner/Wealth Advisor at Waterstone Private Wealth Management.

Securities offered through Cetera Advisor Networks LLC, Member FINRA/SIPC. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor.  Cetera Advisor Networks LLC is under separate ownership from any other named entity.

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