We believe, that of the many problems people face when they retire, the number one issue is having enough income in retirement. You need to make sure you have enough money every month to live on, and you want to try to ensure that you don’t outlive your money.
How do you Calculate how much Retirement Income you will Need?
At Decker Retirement Planning, we typically factor in a 20% increase in income required above what you are currently spending. This comes as a surprise to some people, because they tend to think they will need less income in retirement.
While it’s true that some of your expenses (like commuting and business attire) will go down, when you’re no longer working, you’ll have more time, and you’ll want to do more things. For instance, you’ll probably want more money for travel and entertainment expenses. You’ve saved up your whole life, and you should enjoy these years!
When can you Retire?
Deciding when you have amassed enough money in your portfolio to retire is a very big question that has to start with a conversation about the 4% rule. Basically, that rule says that you can take 4% of your money out of your retirement nest egg every year, and you’ll be just fine. The trouble is, that rule is completely flawed when it comes to retirement planning and was debunked by its creator after the 2008 recession. (But, most bankers and big brokerages are still using it!)
As an independent firm with a fiduciary responsibility to put your best interests above all else, we are appalled by the ongoing 4% myth perpetuation. We will never allow that inaccurate, dangerous approach to affect your retirement income. We don’t ever want to see a retiree forced to sell their home, move in with their kids, or go back to work because of a big stock market drop. That is not how we do retirement planning here!
At Decker Retirement Planning, we start by analyzing your current retirement portfolio and designing a distribution plan that utilizes math-based, principal-protected income sources first. If we run the numbers and the distribution plan shows you can safely take out retirement income in the amount of your current spending level plus 20%, then you are ready to retire. If not, we will work together on the fastest path to get you there.
Retirement Distribution Planning
The nuts and bolts of retirement distribution planning comes down to a lot of math. We run specific calculations to see how much you can spend and whether or not this lines up with your needs and desires.
In order to calculate retirement income projections, we examine all of your assets as well as all income sources. Pensions, Social Security, dividends, interest, inheritance, rental real estate—all income sources are taken into account. We total them up, minus taxes, plus a 3% COLA (Cost of Living Adjustment) up to age 100. This results in an annual and monthly income projection you can rely on.
We call this the maximum income strategy, and if you haven’t done these calculations, you are just guessing. If you want to know if you will have enough income in retirement to last for the rest of your life, this is where you need to start. We’ll give you a solid idea of what you can draw out and when.
Retirement Planning
Of course, we have strategies we will recommend based on your unique situation and goals. Help minimizing income taxes is a huge part of what we consider in your retirement plan. We will also help plan for what happens if one spouse predeceases the other, address your legacy, and put other protections in place. In fact, there are more than two dozen potential problems we will address in your overall retirement plan.
And remember, you may not have to be frugal once you understand what you have in terms of income in retirement. It’s okay to spend money, as long as you know you’re not spending too much!
Contact Decker Retirement Planning by calling us at 855.425.4566 to explore what you could do to create a solid retirement plan.
We invite you to learn more by listening to our radio broadcasts at Decker Retirement Planning, Inc.
