Financial Focus: Calculating your post-retirement income, post-haste


Do you know how much money is enough for retirement? We’ll show you how to find out.

“Time waits for no man”
- Ancient Proverb

That ancient quote is a great reminder of how important it is to start planning for your retirement. Whether we choose to acknowledge it or not, retirement is creeping up on us. Even for those who have just started their careers, retirement planning is essential to providing a secure future for themselves and their loved ones. But that doesn’t mean we’re defenseless against time. In fact, with the proper planning, life after work can be the most rewarding years of your life.

One of the first ways to begin planning for retirement is to determine your desired post-work income. Post-work income is the amount of money you’ll need to live comfortably at current income levels after you’ve retired. That means having enough money to live comfortably without worrying about running out. It also means making sure you have enough extra to do the things you’ve always wanted to, like travel, or just plain relax!

Meeting with a financial professional and determining your post-work income is fairly painless. But not many Americans have done it. According to the 2017 Retirement Confidence Survey (RCS), released annually by the Employee Benefits Research Institute (EBRI), 41 percent of workers say they have tried to calculate how much they need to accumulate for retirement.

So here’s a quick rundown of determining what you’ll need to save for retirement. Your post-retirement income heavily depends on the age you wish to retire and how much money per-year you wish to spend. Generally, you want to have between 75 percent and 95 percent of your pre-retirement income available to you per year. This way, you won’t be forced to deal with a drastic decline in the way you live. Many people grow accustomed to living on a certain income, and it’s important to stay consistent after retirement. People are living longer too, so you’ll also want to take that into account, along with inflation. In general, it’s been said that in order to preserve your retirement assets, you’ll want to take out percent or less per year.

Here’s a quick and easy example of how to determine what you’ll need to save to be in the ballpark: If you make $100,000 a year, you’ll need around $80,000 in annual income during retirement. Once you reach retirement age, Social Security will cover some of that, and a pension will, too, if you get one, so your portfolio would need to produce $50,000 to $60,000 of that income.1

Getting a rough idea of a number is a good way to light a fire under your retirement plan. Often people believe they are saving enough, when the reality is, they’ll fall short of what is needed. By determining a rough estimate, you can then work with a financial professional to nail down an exact number. The sooner you get started saving, the easier it is on your future.

Twenty-four percent of workers and 39 percent of retirees have sought the help of a financial professional, according to the 2017 EBRI survey. While something can be said for “doing it yourself’ or just guessing (we don’t recommend that!), most post-retirement income estimates need to be tested for real-world accuracy by financial professionals.

For instance, you may come up with a number that seems sufficient, but with the help of an experienced professional, your number can be put through a series of scenarios to see if it holds up under certain real world situations. By running it through a series of tests, professionals can determine what possible risks and warning signs may come up. Say, for instance, if you or a spouse were put in a long-term care facility at some point during retirement, your advisor can look at your determined number and see if it will hold up under the strain.

Determining the exact amount of post-retirement income you’ll need is the first step toward saving for your retirement. Once you get that out of the way, you’ve begun down the path of securing your future. Asking for help can be crucial because a professional can tell you if your number will hold up in case of emergencies or other unexpected events. Meeting with a professional and determining how much you need to save is the first step toward determining future goals for retirement. It will wake you up to the real number you need to reach. Best of all, it’s painless, and you’ll be glad you did it.

1, “How Much Money Do I Really Need to Retire at 55?”

Phil Anderson is the owner of Financial Services of Winona. He is a CERTIFIED FINANCIAL PLANNER™ and can be reached at 507-454-2355.

Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Financial Services of Winona and the Securities America Companies are independently owned.

Written by Securities America for distribution by Phillip L. Anderson.


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